Knowing When To Say, “Next!”

Ralph Morales III is an intrapreneur. He began his career in finance and ended up in innovation, a rare trajectory. More specifically, he worked at HP during what he calls the “sunshine moment for new business innovation,” moving from his role as financial marketing analyst to eventually becoming the Director of Innovation, where he was scouting and incubating innovations in virtual reality, IOT solutions, and industrial 3-D printing. He’s currently Head of Innovation Practice at SmartOrg, which helps drive corporate growth by connecting innovation and finance through strategic portfolio management. 

“I’m proof that people can change,” Morales says of his career path. “Part of it is just being a curious learner. My dad was always fixing things. He used to say, ‘Solve the puzzle.’ People come with problems. People who solve puzzles add value.” 

Morales and Innovation Consultant, David Binetti, discussed solutions for some of the trickier innovation puzzles facing intrapreneurs at the Lean Startup Conference. Below are highlights from their conversation.

Hypothesize, Validate, Move On

When Morales was navigating uncertainties around billion dollar portfolios at HP, he avoided getting caught up in who held the most trustworthy assumptions. “It wasn’t, ‘I’m smart, you’re smart. I’m more right, you’re more right,’” he says. 

Rather than ranking ideas along unstructured hierarchies, Morales says, the important thing is to test a range of hypotheses. “Let’s run a simulation across all the assumptions, and find out if the one we’re arguing over really even drives value,” he says. Using this methodology helps ensure that even in situations with wide spectrums of ignorance and speculation, the answers are discoverable because they’re based upon validating hypotheses. 

Morales suggests matching the level of ignorance with “some level of value, and that value is going to have a wide range.” As you work through validating ideas, that range will either “skew to the right, like, ‘This really is a billion dollar opportunity,’” or you’ll realize there’s nothing there, in which case he says the operative word is “next.”

Take Smaller Bets So You Have Cash for the Big Ones

Morales says an innovation director’s job includes “de-risking things and creating opportunities for growth.” That process involves creating a portfolio of options, he adds, especially when you’re talking speculation. 

“It’s all about the probability of success,” he says. If you had $250, for example, you could bank on one stock and hope it works out. When there are high degrees of speculation and uncertainty, though, Morales says it’s better to buy 15 projects at, say, $10, and have $100 in your pocket so you have cash to invest in the stock that really pops. “Basically,  you don’t want to bet on who might be the winner, you want to bet on the fight,” he says, “and then when a fight ensues, you can say, ‘Okay, it’s pretty obvious Tyson’s going to take this, we’re going to put the $100 on him,’ and you’re in a good position.”

Morales says this approach helps companies separate the good opportunities from the bad. And when the right opportunities present themselves, executives have “an investment grade proposal in front of them,” he adds. “You know you’re going to have to put some serious money in, but it’s been de-risked. There’s still work to be done, but it’s like, ‘Okay, we’re going to spool up the machine, get behind this thing, and turn it into something amazing,’” he adds.

Empathize with the Customer at Every Stage

Every new opportunity starts with the same approach, says Morales: understanding and having empathy for what the customer is going through at the moment. “That’s the acumen at the very beginning that allows us to figure out what the job to be done is, what is the thing that really matters here?” he says. “Then use the muscle, might, and capability of the rest of the organization to build something powerful.”

Score the Risks

Morales teaches companies to score each hypothesis with ignorance and value ratings. He can then show executives the uncertain value—”It could be $100 million or $1.4 billion—and that putting these unknowns to the test requires resources. Innovation leaders can then use metrics to show executives how they’ve de-risked various opportunities. “You come back and say, ‘Okay, this used to have a score of 1,000, and now it has a score of 650. We think there’s one more sprint, one more cycle, and we can de-risk this thing so that it’s now an investment grade proposal that you can hand over to a division—or if you want to park this off to the side and special fund it, great.” says Morales. 

The benefit of this approach, says Morales, is that it involves discipline. “The executives know if this thing is getting bigger or smaller, [they get that] the resources are fairly small but they’re tied to de-risking, and they’ll know if it’s ready to hand over and pour jet fuel on, or does it still need some more cycles?” As this process happens with regular frequency, investment boards can make decisions on new ideas very quickly. This approach also helps the division leads – who comprise the boards – see new projects coming early and plan accordingly for them, rather than having to react to them. 

In the end, Morales suggests creating a culture of continuous learning by following the old adage of falling in love with the problem, not the solution. He also suggests becoming very comfortable with the word “next”—as in, failure isn’t a dead end, it’s a sign post leading you to  your next discovery.

Thanks to Jennifer Maerz for contributing this piece. If you seek to bring the entrepreneurial spirit to your organization, Lean Startup Co. can help.