Story as competitive advantage
Startups have very few resources. In fact, a great definition of entrepreneurship is “harnessing resources beyond your immediate control.” Developing a strategy of competition with few resources is challenging. Competing on price, quality, or speed all require significant capital, whether financial or human. Even resource starved companies, however, can generate narrative capital, a resource created by telling a compelling story about the WHY of the business. Narrative capital is basically free (except for a lot of creative time crafting it) and can create an extremely rich, differentiated experience for customers.
For example, contrast a donation made to the behemoth Red Cross versus a donation to Samaritan’s Purse which goes directly to Sakisha in Pakistan, who then sent you a signed letter. The latter is really the same product as the former — but creates a dramatically richer experience for the customer, without really requiring more resources to enable. Samaritan’s Purse endowed their product with a narrative, which is essentially free and significantly increases consumer demand / willingness to pay.
Resource-strapped startups should craft powerful narratives of the WHY of their business — it is a nearly-free form of capital and targets incumbents where they are weak: giant companies have no WHY — they have no compelling narrative that invites customers in to be part of their mission.
Narrative capital is the expected collective or economic benefits derived from preference for a good or service by a customer because of the narrative experience it creates. By generating narrative capital, startups develop an asset that can help them topple incumbents.
In a recent workshop I led for Fortune 1,000 Chief Marketing Officers, I presented this thesis. In theory, they were not persuaded. But by example, they were.
Consider these examples:
Glasses, watches, jewelry, and eggs — each is often a commodity product, yet each of these small companies created a sound product but richly endowed it with a story. The richness of these narratives is seem just by how their customers talk about the product — yes they may mention style, quality, or beauty — but what they tell their friends, what they tell their family, and, most importantly, what they tell themselves is the story itself. As you put on your Shinola watch each morning, the weight of the metal and the suppleness of the leather conjure up images of artisans at a Detroit workbench. Cracking Tandem Farms eggs is a chance to connect with “doing farming right” and — for many consumers — a chance to remember their trip to visit or handshake with one of the farmers.
After watching these examples, a few of the CMO’s started to get it. The exercise we then did was to craft a narrative of an insurgent competitor. This narrative was to appeal to one of their existing customers around a value proposition on which their company wasn’t delivering very well. So, if you make mass produced jewelry and your customers think of you as a bulk provider, an insurgent competitor might create stories around each of their lines, of who designed them and with what materials. This exercise taught us that winsome, authentic stories can be extremely for incumbents to respond to — because in reality often their story simply cannot compete.
Now, big brands are starting to catch on and many are committing huge production budgets to tell tell their story. But, as the saying goes, good marketing only helps bad ideas fail faster. Or, we might adapt this here to say: a well-told story doesn’t captivate anyone if it isn’t credible.
Consider this Shinola-like video from an odd source.
After a lead up like that, you’d expect to see a vintage motorcycle or maybe even a battleship — but a Chrysler? Seriously? It’s like right at the most dramatic moment out pops a Geo Prizm.
What should startups learn from this? Big brands will outspend you — their production will be better and their distribution wider. But very few have authenticity. As a startup of one or even a startup of fifty, you are still so small that you aren’t even capable of inauthenticity yet. So, when all you have to offer is your story — tell it, and tell it well.