Every Mature Company Needs Two Stories

When you talk to leaders inside SaaS companies these days, you hear a lot of frustration. And it’s not hard to understand why. By many of the numbers that are supposed to drive stock performance, revenue growth, earnings, cash flow, these companies are in great shape. Yet over the last few months, many SaaS stocks have fallen 60 to 80 percent or more. The media has dubbed it the “SaaSpocalypse,” and given all four horsemen the same name: AI.

The SaaSpocalypse has had me thinking a lot about the shaky connection between strong company performance and stock price.

I work with a lot of healthcare leaders, and just over a year ago, many health insurance stocks cratered, too. These were not speculative companies living on hype. They were widely seen as some of the steadiest performers in the market. UnitedHealth Group, for example, had spent years training investors to expect low-to-mid-teens adjusted EPS growth. Then, almost overnight, the stock lost more than 20% of its value. Humana and CVS were not far behind.

To be fair, this was not exactly the same story as what’s happening with the SaaS companies. These healthcare companies missed earnings, misjudged how many seniors would use medical services, and cut guidance. But what stood out was how little their years of consistent performance protected them. If anything, it seemed to make the shock worse.

When a company becomes known for delivering consistently, any break in the pattern gets magnified. Performance bumps stop looking like a bad quarter. They start to take on existential meaning. They become a reminder of how quickly confidence can turn when investors stop feeling sure about the future.

That points to something companies often forget as they grow up. Early on, a growth story is essential. It’s how investors learn to believe in the company’s future. But over time, steady performance becomes the story. That can work for years. Until performance slips and the market is left uncertain about what comes next.

Coke or Tesla?

There are, broadly speaking, two ways a company earns a premium valuation.

One is through consistent performance.

That’s the Coca-Cola model. Warren Buffett loves Coca-Cola because of its consistency. As Buffett says, brand and distribution power make companies like Coke, “so wonderful that an idiot can run them.” Even as people decry the health risks of consuming sugary beverages or prognosticate about the impacts of Ozempic, Coca-Cola continues to be a “dividend king,” with 63+ years of consecutive dividend increases. This is a company whose reputation is built on its reliable ability to produce consistent results regardless of what is thrown at it. You do not have to squint to see the future, because the present seems like it’s a very reliable indicator.

The other is through a story about what is next.

That’s the Tesla model. For many investors, Tesla has never been valued just as a car company. The valuation rests on a bigger idea. The idea that the company is really about autonomy, AI, robotics, energy, and a much larger future that has not yet fully arrived. Whatever you think of its founder’s current antics or what happened with electric vehicles last quarter, people are investing in a promise. Belief beyond the current numbers.

Both paths can work. But one of them gets more fragile with age.

A company built on consistent performance can become brittle. The better and steadier it has been, the more investors come to expect smooth execution as a given. And when that expectation gets baked into the stock price, even one miss can feel like a crack in the foundation. By then, any pivot to a growth story reads as marketing, not strategy.

A growth story doesn’t replace performance, but gives investors another reason to believe when performance wobbles.

When The Story is Already There

The market reacts differently to a company’s performance challenges when it already has a bigger growth story in place. Take Home Depot, for example.

In 2023, the company came into earnings facing a tougher-than-normal backdrop. The housing market had cooled. Big home projects were slowing down. Consumers were pulling back. On the call, management had to admit the business was not going to hit the marks investors had gotten used to.

That kind of moment can go badly. A company misses guidance. Analysts start asking whether the boom is over, and investors wonder if the best years are behind it.

But Home Depot did not walk into that moment empty-handed. It had already been telling a larger story about growth, especially around the professional customer—the contractors, remodelers, roofers, and tradespeople who shop differently than weekend DIY customers do. Bigger orders. Repeat business. Deeper relationships. More ways to grow over time.

That story didn’t excuse weak results. But it kept investors from treating the current setback as a sign that the whole story is over. The market can absorb a bump more easily when it still has a reason to believe in where the company is headed. When a company has already helped the market see the next chapter, it is less likely to be judged only by the last quarter.

The Problem with Growing Up

This may be the real challenge for mature companies.

Young companies have no choice but to tell a story about growth. They are too early, too unproven, too incomplete to rely on current performance alone. They have to help people imagine the future.

But as companies mature, the incentives change. Investors start to reward predictability. Management teams get trained to focus on delivering the quarter, then the next quarter, then the one after that. Over time, the future story can start to fade into the background—not because anyone thinks it’s unimportant, but because the demands of steady execution feel more urgent and more real.

That’s when companies begin to underinvest in the second story because the first one has served them so well. And that’s risky.

No company performs perfectly forever. At some point, demand shifts, costs rise, policy moves, people finally cut back on sugary drinks, or more seniors seek medical care. When that happens, companies that have spent years teaching the market to value consistent performance above all else can find themselves exposed.

Playbooks and Proof

Weathering performance bumps requires more than a reassuring message. It requires a growth story that the market can actually believe.

But “story” can be a misleading word here. It’s easy to write off “story” as a polished set of marketing spin meant to calm nerves on an earnings call. That kind of story rarely holds up for long. A believable growth story usually rests on two things: a real playbook and real proof.

A playbook is the logic behind where future growth will come from. It reflects a clear point of view about the biggest strategic questions ahead. Which capabilities will matter most in the next five years? Which ones will be hardest to copy? Which markets or opportunities best fit those strengths? What do you see about the future that others still seem to be missing? What creative and compelling solutions can you build to drive results?

But a playbook on its own is not enough. Markets do not move on strategy decks. They move when a company starts showing evidence that its view of the future is more than talk.

That’s where proof becomes essential.

The best companies start with experiments. Small moves into new markets. Early product bets. New partnerships. Signals that show the company is not just describing the future, but starting to build toward it.

Experiments aren’t just for reducing risk internally. Quietly testing and learning before a big launch can protect confidentiality and avoid public mistakes, but can also rob investors of much-needed confidence. Experiments make a growth story feel concrete for stakeholders outside of the company. They publicly show commitment to a vision for growth before the company is forced to defend it.

Getting the timing right matters, of course. If a company has been seeding experiments and talking about them before performance slips, the market is more likely to see a serious strategy taking shape. If those same experiments only show up after a miss, they can sound like a cover story.

In many ways, UnitedHealth Group is one of the better examples of getting this right. Back in 2011, the company began experimenting with a new kind of business built around health data and analytics. It kept running the core insurance business well, but started investing in Optum as a new model for growth beyond traditional insurance. That gave the market a bigger story to believe in. Not just a company performing well in the present, but one building its next engine of growth. Over time, that story expanded into health services, pharmacy, finance, and more. Most importantly, UnitedHealth started building that story before the market was asking for it.

And that may be the lesson for us all as we head deeper into a more uncertain stretch for our economy.

When times get shakier, consistent performance matters. But that story isn’t enough on its own. The companies that hold confidence best are the ones that give investors something else to hold onto. A clear growth story that’s been built before you need it. Because when the numbers slip, that story is what keeps belief from slipping with them.