The art and science of corporate storytelling: An interview with Rob Berick, Falls Communications
4 July 2017
By Taryn Shulman
As a communications and investor relations executive for close to 30 years, Rob Berick has become a leading industry expert on corporate storytelling. We caught up with Rob, based in Cleveland, OH, to better understand the role of corporate storytelling in today’s hyper-connected, global marketplace and to determine – once and for all – if great storytelling is an art, a science, or both.
Q4: Rob, you’ve been involved with corporate communications and IR for close to three decades. How has the industry evolved?
Rob Berick (RB): In many ways, it’s less about how the industry has evolved and more about how the marketplace around publicly traded companies has evolved.
When I started in this field, it seemed the essential role of IR was to keep management teams — particularly CEOs — from saying too much too soon to investors. It’s not that these senior executives were reckless or looking to mislead the market. Far from it. They were simply excited about their company’s long-term prospects and wanted investors to share that same level of excitement. It was a role that managed the balance between compliance and marketing.
Obviously, in today’s complex global market, striking that balance is extremely difficult when you consider the ever-changing regulatory environment and IR’s increased role in audience segmentation and channel development. At the same time, IR now needs to be even more mindful of corporate governance, enterprise risk management and ESG, among other things, when meeting these different obligations.
Q4: How do you think we got here?
RB: Looking back, there are several events that have made an impact:
For starters, Reg FD caused many management teams and their boards to lean more heavily on their legal counsel for traditional IR activities to avoid any unintended regulatory missteps. For most companies, the increased legal influence in this area resulted in a decreased level of context and market commentary in company disclosures.
SOX created an equally strong voice for accounting firms and auditing firms in investor relations — further dampening the level of information being provided to investors by many companies.
And let’s not forget how the role of the sell-side analyst — traditionally the primary communications channel between management teams and investors — changed radically in the wake of the $1.4 billion settlement between then-Attorney General of New York Eliot Spitzer and the Wall Street banks.
Finally, investor behavior also began to change as technological advances created a new generation of investment vehicles — such as Exchange Traded Funds (ETFs) — and high-frequency trading strategies based on computer algorithms. The cumulative effect of all these factors resulted in an extremely difficult and volatile environment for companies in which to compete for capital.
Q4: I’ve heard you talk about how effective IR requires effective storytelling. Can you explain what you mean?
RB: Research shows that “effective” IR can add a median premium of 10 percent to a company’s valuation, while “ineffective” IR can cost a company a median discount of 20 percent. That’s a huge potential swing in valuation.
When you dig into what constitutes “effective” IR in the minds of buy-side investors, it really boils down to insight into intangibles — long-term growth strategy, key value-creation catalysts, end market trends, R&D, capital allocation plans, etc.
Too often, companies merely report data when investors want the “dots connected” for them. It’s been my experience that storytelling is the most effective and efficient way to connect these dots. In fact, according to the U.S. Defense Advanced Research Projects Agency (DARPA), which has spent millions of dollars studying storytelling, “stories exert a powerful influence on human thoughts and behavior. They consolidate memory, shape emotions, cue heuristics and biases in judgment.”
Q4: What tips can you provide IROs to help them become better corporate storytellers?
RB: IROs, when developing their company’s corporate narrative, should focus on what Simon Sinek refers to as the why. The reason the why is so important is that it speaks directly to the sections of the brain that control decision-making. On the other hand, the brain processes results — the what — elsewhere.
Sinek explains that why trumps what because “[we] trust our gut even if the decision flies in the face of all the facts and figures.” In fact, companies that focus on what at the expense of why are actually making the decision-making process harder for investors. To wit, the numbers cannot speak for themselves.
Just as you bring the value of your products and services to life for customers through storytelling, why would you not use storytelling to illuminate the value you offer investors?
Q4: So do you believe storytelling is an art or a science?
RB: There’s an art and science to corporate storytelling. The “art” hinges on what Malcolm Gladwell coined “The Stickiness Factor”, such as what makes it memorable, what makes it easily retold by others, etc.
This concept was explored further by Chip and Dan Heath in their book, Made to Stick, where they determined certain elements such as simplicity, unexpectedness, credibility, among others are required for making a story ‘stickier’.
On the other hand, the “science” of storytelling is rooted in research. First and foremost, you must have a clear-eyed view of your business from the outside in, including:
- How do investors view the industry and/or the end markets? How does this match up with historic views and future outlook?
- What is the current investor base composition?
- What is the current investor sentiment for the company and its current/desired peers?
- What does the gap analysis of the company’s investor engagement versus current/desired peers look like?
- How well does the company’s current story resonate with investors?
Similarly, you need an unvarnished view of the company from the inside out, such as:
- Can the company clearly articulate its strategic vision (i.e., does it know where it’s going and how it is going to get there)?
- What is the company’s current story and how does it deliver it to investors?
- What aspects of the company’s story are unknown, unrecognized or misunderstood that could be assets to value creation if told in a compelling and meaningful way?
- What is the historic/current level of management credibility within the investment community
This data, which should be audited and reconciled regularly as you would your financial and enterprise risk-management reporting, will ensure that the corporate narrative properly aligns the business and the investment brand. This alignment is critical to long-term value creation.
Q4: Any advice for IROs who want to sharpen their storytelling capabilities?
I would say: start by asking yourself tough(er) questions to get to the “why” of your company’s story. Questions like:
- Why is now the right time to invest in your company?
- What makes your peers more attractive to investors?
- What don’t investors fully understand / appreciate about the company?
- What does your performance-to-expectations ratio — the “P/E ratio” of investor relations — look like and how can it be improved?
Then, think like a brand strategist:
- What is your “investment brand”?
- What makes your investment brand authentic?
- What differentiates your investment brand?
And, finally, act like a marketer:
- How can you simplify the complexity of your enterprise and deflate potential value inhibitors?
- What’s your channel strategy and how can you better capture and maintain investor interest?
- What’s your feedback loop and how are you monitoring the viability of/threats to your investment brand?
Q4: Do you have any final words of wisdom? Perhaps, a tip on how to make your value proposition stand out amongst your peer?
On a day-to-day basis, corporate storytelling can enhance investor understanding of the business by simplifying its complexity and neutralizing potential value deflators. It can mean the difference between an investment in your company rather than a peer. And in times of organizational distress, including shareholder activism, effective corporate storytelling can mean the difference between a vote of support and a vote of “no confidence.”
The key is genuine, authentic content written that reflects the central essence of the company and speaks to a company’s differentiated competitive advantage. I refer to this as the investment brand.
Matt Sonefeldt, who led LinkedIn’s IR function for many years, put it best in a 2013 post when he wrote: “Storytelling who you are = the future direction of building a relationship b/w public companies & long-term focused investors. The good ones will do this well.”
Rob Berick, senior vice president and managing director of Falls Communications, is a senior communications executive with more than 25 years experience helping organizations engage stakeholders, drive growth initiatives and enhance value through integrated communications strategies. Follow Rob on LinkedIn or on Twitter.