I’ve worked with narratives in software design before, and I agree with you it can prove to be a very powerful concept, because it forces you to mentally visualize activities, work flow and relevance. Features that may seem “cool” in a visual can, when exposed to a narrative analysis, fall flat or expose glaring weaknesses, while sometimes you end up realizing that there are things that you’d like to do but that the design as it exists doesn’t allow.

The central challenge with narratives is very much the same as with any design process – the strength of such a narrative is directly proportional to the ability of the designer as story teller. Of course, if you can’t tell a story, then I think your abilities as a designer are likely very limited as well, because both require the ability to think about flow, pacing, economy of action and use of metaphor.

I’d also invoke Scott McCloud here, as his books (especially Understanding Comics) should be required reading not only for the semiotician but the designer as narrator.