Setup for Collaborative Narrative
All that you need ahead of time is provocative opening sentences the groups/class will use to build their narratives. You can make these up or borrow them from novels or short stories -- the opening sentence of Kafka's "Metamorphosis" get them started on stories about a guy who turns into a bug, for example. To model the activity as a class, write down the first sentence and then go around the room and have each person contribute successive sentences. Description usually falls out the window as they concentrate on plot, so reinforce the idea that detail is important to the meaning of the narrative. (If someone says, "a girl walks in," encourage the next person to describe that girl a little.) Go around until you come to some sort of conclusion. If they get into this, you can go through the class twice and just keep building.
In small groups, give them all the same sentence and have them repeat this, with one person recording their story as they come up with it. Again, reinforce the idea of detail -- they usually come up with only a bare-bones plot and no development. When everyone is done, have a reporter for each group read the story aloud.