INOM EXAMENSARBETE INDUSTRIELL EKONOMI,AVANCERAD NIVÅ, 30 HP

, STOCKHOLM SVERIGE 2020

Exploring Idea Selection in Innovative Early-Stage StartupsA Framework for Analyzing Ideas in a Lean Development Context

EMIL FRÖBERG

KTHSKOLAN FÖR INDUSTRIELL TEKNIK OCH MANAGEMENT

Exploring Idea Selection in Innovative Early-Stage Startups

A Framework for Analyzing Ideas in a Lean Development

Context

by

Emil Fröberg

Master of Science Thesis TRITA-ITM-EX 2020:141 KTH Industrial Engineering and Management

Industrial Management SE-100 44 STOCKHOLM

Granskning av Idéurval i Innovativa Startups

Ett Ramverk för att Analysera Idéer i en Lean Development Kontext

Emil Fröberg

Master of Science Thesis TRITA-ITM-EX 2020:141 KTH Industrial Engineering and Management

Industrial Management SE-100 44 STOCKHOLM

Master of Science Thesis TRITA-ITM-EX 2020:141

Exploring Idea Selection in Innovative Early-Stage Startups

A Framework for Analyzing Ideas in a Lean Development Context

Emil Fröberg

Approved

2020-06-02 Examiner

Kristina Nyström Supervisor

Ebba Laurin Commissioner

Hedvig Contact person

Alexander Segerby

Abstract Innovation is a key factor for companies in order to survive in the long-term and to stay competitive. However, it can be challenging to know what ideas (or innovations) to pursue. Large incumbent companies can be slow to innovate, but startups on the other hand, are a great source of innovation. However, many startups fail. Starting a new company is risky, but a countervailing force has emerged called Lean Development. There is a strong need for research and studies on the subject of product development in a Lean Development context and the process of Idea Selection has been somewhat ignored in research. Idea Selection is a part of the Front End of Innovation and is often mentioned as an important factor for success in the innovation process. This study was aimed at creating a framework for Idea Selection, building on the intersection between the Front End of Innovation and the New Product and Process Development in a Lean Development context. The findings are based on current theory on Innovation, Idea Selection and Lean Development as well as a case study conducted at a Swedish insurance startup. The main conclusion of this study is a framework containing four themes: Reach, Impact, Confidence and Effort. By using this framework, startups can more easily decide on what ideas to pursue and thereby move quicker and achieve more success in the innovation process. Key-words Front End of Innovation, Idea Selection, New Product Development, Lean Development, startup

Examensarbete TRITA-ITM-EX 2020:141

Granskning av Idéurval i Innovativa Startups

Ett Ramverk för att Analysera Idéer i en Lean Development Kontext

Emil Fröberg

Godkänt

2020-06-02

Examinator

Kristina Nyström

Handledare

Ebba Laurin Uppdragsgivare

Hedvig Kontaktperson

Alexander Segerby

Sammanfattning För ett företag är innovation en nyckelfaktor för långsiktig överlevnad och för att vara konkurrenskraftig. Det kan emellertid vara utmanande att veta vilka idéer (eller innovationer) som bör utforskas vidare och implementeras. Stora etablerade företag kan vara långsamma att innovera, men nystartade företag, startups, kännetecknas å andra sidan ofta av att ha stor innovationsförmåga. Men många startups misslyckas. Att starta ett nytt företag är riskabelt. För att minska den risken har något som kallas Lean Development växt fram. Det finns ett starkt behov av forskning och studier om produktutveckling i Lean Development-sammanhang och processen att välja ut idéer har ignorerats i forskning. Idéval är en del av Front End of Innovation och nämns ofta som en viktig faktor för framgång i innovationsprocessen. Denna studie syftar till att skapa ett ramverk för Idéval, som bygger på skärningspunkten mellan Front End of Innovation och New Product and Process Development ett Lean Development-sammanhang. Resultat är baserade på aktuell teori om Innovation, Idéval och Lean Development samt en fallstudie genomförd vid en svensk startup inom försäkringsbranschen. Den huvudsakliga slutsatsen i denna studie är ett ramverk som innehåller fyra teman: Reach, Impact, Confidence and Effort. Genom att använda detta ramverk kan nystartade företag lättare bestämma vilka idéer de ska gå vidare med och därmed bli mer snabbrörliga och uppnå mer framgång i innovationsprocessen. Nyckelord Front End of Innovation, Idea Selection, New Product Development, Lean Development, startup

Contents

List of Figures 3

List of Tables 4

Acknowledgements 5

1. Introduction 6 1.1 Background 6 1.2 Problematization 8 1.3 Thesis Purpose 9 1.4 Research Question 9 1.5 Contributions 9 1.6 Delimitations 10 1.7 Sustainability Aspects 10

2. Case Company and Industry 11 2.1 Industry for Home Insurance 11 2.2 Insurance Offering 11 2.3 Insurance and Travel-Related Compensation 12

3. Theoretical Framework 13 3.1 Front End of Innovation (FEI) 14

3.1.1 Idea Selection 17 3.1.2 Analysis & Evaluation of Selection Criteria 21

3.2 New Product and Process Development (NPPD) 22 3.2.1 Lean Development 23 3.2.2 The Three Key Principles of Lean Development 26

4. Conceptual Framework 30

5. Research Design and Methodological Choices 34 5.1 Research Design 34

5.1.1 Part 1: Pre-study 35 5.1.2 Part 2: Case study and Expert Interviews 35

5.2 Data Collection 37 5.2.1 Interview data 38 5.2.2 Observations and Secondary Sources 40

5.3 Research Quality 42 5.4 Research Ethics 42

6. Findings & Analysis 44

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6.1 Components of the Framework for Idea Selection 44 6.1.1 Findings from Expert Interviews 45 6.1.2 The Components of the Final Framework for Idea Selection 50 6.1.3 Implementing the Framework 51

6.2 Applying the Framework for Idea Selection 54 6.2.1 Idea Description 54 6.2.2 Evaluating the Idea using the Framework 55

7. Discussion and Conclusions 60 7.1 The Framework for Idea Selection 60 7.2 Answering the Research Questions 61 7.3 Limitations 62 7.4 Managerial Implications 63 7.5 Suggestions for Future Research 63

8. References 65

Appendix 1 i

Appendix 2 ii

Appendix 3 iii

Appendix 4 iv

Appendix 5 v

Appendix 6 vi

Appendix 7 vii

2

List of Figures

Figure 1: The innovation process in three parts 14

Figure 2: The stages in the FEI 15

Figure 3: The New Concept Development model (NCD) 16

Figure 4: The seven-step new product process 23

Figure 5: Three parts of Lean Development 24

Figure 6: Lean Development in the NPPD 25

Figure 7: The Lean Canvas 27

Figure 8: The Customer Development process 28

Figure 9: Relevant areas for the conceptual framework 30

Figure 10: The context of the conceptual framework for Lean Development

Idea Selection 31

Figure 11: Research design 34

Figure 12: Steps of the case study 36

Figure 13: Community and functionality are important parameters for

creating successful products 48

Figure 14: Framework for Idea Selection 53

Figure 15: Illustration of the Idea Selection Process 54

Figure 16: The Framework for Idea Selection applied to an idea at Hedvig 57

3

List of Tables

Table 1: The key differences of FFE and the product development phase 16

Table 2: A framework for selecting ideas 20

Table 3: Proposed selection criteria 32

Table 4: Weights and importance - the value of the weight signifies the

importance of the criteria 33

Table 5: Empirical material used in this study 38

Table 6: Interview participants 40

Table 7: Categorization of ideas 41

Table 8: Proposed selection criteria, conceptual framework for Idea Selection 44

Table 9: Findings - Selection criteria derived from expert interviews 45

Table 10: Components of the final framework for Idea Selection 50

Table 11: Weights and importance 54

4

Acknowledgements

Conducting this Master’s thesis has been a challenging, but inspiring journey. This research is the final and concluding step of my Master of Science degree in Industrial Engineering and Management, and it would not have been possible without the help and support from several people. I would like to sincerely thank my supervisor at the Royal Institute of Technology, Ph.D. Ebba Laurin. You have contributed with continuous support and valuable insights to guide me in all steps of the research process. I would also like to express my gratitude to my supervisor at the investigated company; Alexander Segerby. Thank you for offering support, knowledge and guidance. Moreover, I would like to thank my girlfriend, Linnea, for helping me to stay motivated. Lastly, I also want to thank all the interviewees who participated in this study. Without you, this study would not have been possible.

Emil Fröberg Stockholm, June 2020

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1. Introduction

In the following chapter a background is given, which includes a problematization of the

process for startups to select the best ideas to pursue in a Lean Development context. After

this, the purpose and the main research questions that the report aims to answer are

presented. Lastly, the scientific contribution, sustainability and the delimitations of the study

is introduced.

1.1 Background

A key factor for the survival of a company is innovation (Tidd et al. 1997) in order to stay

competitive and adapt to new market conditions. In today's fast evolving environment

resulting from globalisation and changing technologies, this has become even more essential

and harder (Laurin, Kaulio & Nuur 2017). Startups are a great source of innovation (Weiblen,

2015) and due to the emergence of new technologies such as the internet, opportunities for

new innovative companies have arisen. The emergence of these technologies have also led to

faster product development processes, since software products can be developed and

distributed quickly. Tech startups have changed the dynamics of many industries in later

years. For example, consider what Spotify has done for the music industry, Netflix for the

film industry, AirBnb for the travel industry, Uber for the taxi industry or Amazon for the

retail industry. Tech startups bring new technology to incumbent industries and are changing

the world. Putting this aside, most startups unfortunately fail. It is estimated that 20-30% of

venture backed startups in the US fail, and more recent reports estimates that up to 75% of

venture backed startups fail in the sense that they liquidate their assets (Gage, 2012). Adding

to this, another 95% of venture backed startups do not deliver the projected return on

investment (Blank, 2013). Being that so many startups fail, starting a new company is risky.

However, a countervailing force has emerged - the Lean startup - which can make the process

of starting a company less risky. This product development process and the increasingly

popular entrepreneurial approach has its origin in software development and is known as the

Lean Startup process or Lean Development (Blank, 2013; Eisemann et al., 2012; Mansoori,

2017; Maurya, 2012; Ries, 2011). A cornerstone of the Lean Methodology involves an

iterative approach to testing ideas or hypotheses to learn what works and what does not.

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This thesis explores innovation processes through studying the case of Hedvig, a swedish

insurance startup. The industry in Sweden for home insurance has not changed significantly

in decades and the market for homeowners insurance is dominated by four incumbent

companies: Folksam, Länsförsäkringar, if and TryggHansa (see Appendix 1). What is more,

many customers in Sweden are dissatisfied with their homeowners insurance. Capgemini

shows that less than 40% of customers are satisfied (Capgemini, 2015). The low satisfaction

in the industry has given opportunity for companies like Hedvig to emerge. Hedvig is a

startup within homeowners insurance. Hedvig aims to change the insurance industry just like

Spotify, Netflix, AirBnb, Uber and Amazon have done for their respective industries.

Accordingly, there are many ideas at Hedvig, regarding for instance new features to

implement, new service offerings and other projects. Hedvig follows a Lean Development

methodology where customer feedback and iterative development is in focus. In general, as

the case for Hedvig, startups are characterized by having limited resources in the form of

capital, time and human resources. Therefore, the importance of prioritizing the right projects

and tasks and to select the best ideas to execute becomes even more crucial, as the resources

need to be used as efficiently as possible.

The process of driving innovation is well explored and many examples of different

approaches used by organizations can be found. For example, the E-commerce giant

Amazon, drives innovation by hiring entrepreneurial and innovative employees (Stone,

2013). To tackle the problem of selecting the best ideas (or innovations) suggested by the

employees, Amazon developed an approach called the “PR/FAQ”. This is a six-page

document consisting of a press release and an FAQ relating to the imagined finished product

(Denning, 2019). The PR/FAQ can be seen as a prototype of a product announcement as if it

was ready to launch. The purpose of this approach is to kill bad, unfinished or unstructured

ideas as quickly as possible, to enable a platform for launching new ideas and to provide a

structured and unified way of communicating ideas. While Lean Development might provide

an answer to how to go from product idea to launch, the methodology does not provide

insights on what to do if too many ideas exist. The PR/FAQ involves the Front End

Innovation (FEI), which is a process that is defined as the period between when an

opportunity is first considered and when an idea is judged to be ready for development. The

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importance of the FEI in the innovation process has been emphasized by several authors

(Cooper, 1988; Kim & Wilemon, 2002). A central step in FEI is a process called Idea

Selection, which is conducted with the aim of identifying the best idea to pursue. The process

of Idea Selection involves evaluating a set of selection criteria (Rochford, 1991; Bitman et

al., 2008; Ebner, 2009) and is therefore a typical multi-criteria decision-making (MCDM)

problem. This evaluation process was designed with a linear innovation process in mind, as

described by Cooper (1988). After the introduction of Lean Development, the process of Idea

Selection has become less important - as the original idea is now subject to change. It is

unclear whether the methods for Idea Selection as suggested by Rochford (1988), Bitman et

al. (2008) and Ebner (2009) apply to Lean Development. Furthermore, Collis (2016) argues

that an initial strategic screening of ideas can save a startup from going down the wrong path:

one that might be validated in a Lean Development process but is unlikely to support a long

term business.

1.2 Problematization

Until now, launching a new startup has been a hit-or-miss proposition (Blank, 2013). Most

likely, the entrepreneur starting a company will suffer a fatal setback. Again, most startups

fail for reasons such as the idea that make the foundation for starting the company is not good

enough, there are too many ideas and the most promising ideas are not always pursued. Lean

Development may be a countermeasure for startup failure, but Lean Development assumes a

starting point in the form of an idea that already exists. The methodology only works if a

starting idea has been selected and Lean Development does not give any insight on how to

select this idea.

What is more, there is a gap in the current body of research on how startups that implement

Lean Development can benefit from adopting a more formal Idea Selection process. For

example, Collis (2016) states that the usefulness of an initial strategic screening in a Lean

Development process at a startup has not been verified in any studies. Furthermore, Pernstål

et al. (2013) argue that there is a strong need for research and studies on the subject of

product development in a Lean context, and Girotra et al. (2010) suggests that the Idea

Selection process has been ignored in research. Exploratory interviews at the case company

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Hedvig have shown that while a lot of ideas can be a good thing, it can also be distracting.

Hence, there is a need for a method to select which ideas to be pursued.

1.3 Thesis Purpose

The purpose of this thesis is to explore how startups can make better decisions regarding

Idea Selection, with focus in a Lean Development context. Through an in-depth case study at

the startup Hedvig, a framework for Idea Selection will be constructed and implemented.

Furthermore, this thesis will identify what implications Lean Development have on the Idea

Selection process in a startup.

1.4 Research Question

In order to fulfill the purpose of the thesis, the study vill answer the following research

questions:

Main Research Question (MRQ): How can the Idea Selection process in an early-stage

startup be conducted in a Lean Development context?

A sub-research question (SRQ) has been defined to assist when answering the MRQ:

SRQ: What implications does Lean Development have on the Idea Selection process at an

early-stage startup?

1.5 Contributions

The main contribution from this paper will be an insight on how Idea Selection can be

conducted at a startup in a Lean Development context. By doing this, the report will also

contribute by filling research gaps on this subject. First of all, this report will serve to

increase the research on Lean Development and shed light on the Idea Selection process.

Secondly, Lean Development is a relatively new phenomena and this report is an empirical

case study of this phenomena.

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1.6 Delimitations

The delimitations of this study are presented below:

● This study will focus on the Idea Selection process and the prioritization of the most

promising ideas

● This study involves only the FEI and NPPD, not commercialization. Evaluation

criteria relating to the long-term financials of the idea will not be included

● The industry is insurance and the in-depth study of one disrupting firm

● This study will only focus on early-stage startups (an early-stage startup is defined as

a startup with less than 100 employees)

● Geography is Sweden (Stockholm)

These delimitations and the effects they have on the thesis will be discussed further in section

7.

1.7 Sustainability Aspects

The United Nations have defined 17 goals for sustainable development. These goals address

the global challenges we face and aim to contribute to achieving a better future for all.

Among other, these goals include Quality Education, Affordable and Clean Energy, as well

as Sustainable Cities and Communities (United Nations, 2020). Even though this study does

not directly relate to sustainable development, the conclusions of this study can be used to

enhance innovation within the field of sustainable development. Innovations are central in

order to tackle the global challenges. Innovation and the development of new technologies

are related to many aspects of sustainability (Weaver, 2000). Accordingly, finding ways to

improve the Idea Selection process can help in pursuing the most promising ideas within

sustainable innovations, hence increasing the chance of success.

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2. Case Company and Industry

In this section, the industry setting and the case company is presented to provide a

background to the context in which the research took place.. This is aimed at proving a basic

understanding of the home insurance industry, as well as introducing the case company,

Hedvig.

2.1 Industry for Home Insurance

A definition of insurance is given by The Cambridge English Dictionary: “An insurance is an

agreement in which you pay a company money and they pay your costs if you have an

accident, injury, etc.”. In other words, insurance is a protection from financial loss and is

used to hedge the risk of uncertain loss. There are many types of insurances: auto insurance,

health insurance, life insurance and home insurance, among more. Historically, the industry

for home insurance in Sweden has been dominated by four companies. Together, these four

companies have a 96% market share and Folksam, the largest of the four, has a 49% market

share alone. These four insurance companies have their roots in companies all formed around

the year 1900 (see Appendix 2). The market share of the companies dominating the industry

has barely changed in 25 years, nor has the services or products they provide.

2.2 Insurance Offering

Hedvig was founded in late 2017. Since then, the company has acquired 15 000 customers.

The company states that the insurance industry is broken and wants to challenge the

incumbents of the industry. In a speech at the Brilliant Minds conference in 2019, the CEO of

Hedvig argued that the incentive model of the insurance incumbents is structured in a way

that is disadvantageous to the end-customer. The profits of the incumbents directly depend on

how many claims they pay out to the customer, therefore the incumbents have an incentive to

not pay out claims. Hedvig provides insurance through a mobile app that they claim is

“Insurance that is designed to be used”. There are relatively few startups within the insurance

space, this is partly due to the high barriers to entry. To start an insurance company, there are

complex legal regulations that have to be abided by and a partnership with a so-called

reinsurer (i.e. insurer of insurance companies) has to be formed.

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2.3 Insurance and Travel-Related Compensation

In Sweden, a basic form of travel insurance is included in all home insurances

(Konsumenternas, 2020). There is an additional layer of coverage for people traveling in

Sweden by train and in the EU by airplane. SJ has a clear compensation scheme for how

travellers should be compensated if their train is delayed. Also, in the EU there are certain

rules for compensation for delayed/cancelled flights. The compensation scheme is outlined in

Appendix 3.

Travel compensation management is a large market. Companies in this market are called

claims management companies (CMC) and help travellers make claims for compensation

related to travel, often to airlines. Every year travellers are missing out on 6B USD in

unclaimed compensation and 85% of travellers in the EU are not familiar with their rights

when it comes to compensation for air travel (AirHelp, 2018). There is an opportunity for

Hedvig within this field. Hedvig can provide a valuable service to their customers if they

assist their customers in taking part of the compensation guaranteed by SJ and EU. This way,

Hedvig would act similar to a CMC. Because of COVID-19, travel has declined. This is

because of restrictions and the risk of infection. In March 2020, the number of flights

declined 40% compared to the same period last year (Flightradar, 2020). This affects this

study because travel compensation may become very relevant now that many trips are

cancelled.

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3. Theoretical Framework

The Theoretical Framework consists of two main building blocks and serves as a foundation

for the theories and models which are used in this study. First, the Front end of Innovation is

introduced and methods for Idea Screening and Selection are presented. These methods are

used to evaluate ideas and prioritize between ideas to find the best idea to pursue. Secondly,

the theory behind New Product and Process Development, as well as Lean Development are

presented. These two fields of research will be connected in the Conceptual Framework in

the next chapter.

The theoretical framework used in this study consists of two parts: (1) Front End of

Innovation (FEI) (Kim & Wilemon, 2002; Cooper, 1988; Koen et al., 2001; Kahn 2007) and

(2) New Product and Process Development (NPPD) (Cooper, 1990; Kotler, 2006). However,

the entire innovation process can be described to consist of three parts: FEI, NPPD and

Commercialization, as illustrated in Figure 1 (Koen et al., 2001). Nonetheless, the last part,

Commercialization, falls outside the scope of this report. It is important to study the FEI to

understand the dynamics between when an idea is first born to when an idea is ready to enter

the NPPD stage. The second part of the theoretical framework covers NPPD and focuses on

Lean Development (Blank, 2013; Ries, 2013; Maurya, 2013; Girgenti, 2016); and more

specifically the initial stages of Lean Development. These two main areas (FEI and NPPD)

are included to build a theoretical background of the Idea Selection process, but also to

understand how this process works in a Lean Development context. In order to answer the

research question, the area of NPPD needs to be considered, as Lean Development involves

an iterative process that can redefine the idea. Therefore, the Idea Selection process is

dependent on NPPD.

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Figure 1: The innovation process in three parts (Koen et al. 2001, pg. 51).

3.1 Front End of Innovation (FEI)

Innovation is a key factor in the survival of a company, as previously mentioned (Tidd et al.,

1997). The FEI, also known as the Fuzzy Front-End (FFE) of innovation, is a process that has

been defined as: “The period between when an opportunity is first considered and when an

idea is judged ready for development” (Kim & Wilemon, 2002, pg. 269). An idea in the

context of this report is a new product idea. This is defined as an idea for a new product or

service that is new to the firm developing it. A product is defined by Kotler (2006) as: “An

object or system made available for consumer use; it is anything that can be offered to a

market to satisfy the desire or need of a customer”. This definition can therefore include

improvements to an existing product or features since this can lead to the product satisfying

another need, desire or customer.

The importance of the FEI is emphasized in literature (Cooper, 1988). The process presents

the greatest opportunities for improving the overall innovation process (Koen et al., 2001).

Kahn (2007) argues that the FEI consists of three tasks: Strategic Planning, Idea Generation,

and Idea Selection (or evaluation as Kahn (2007) refers to it). In this report, focus lies on the

last step in the FEI: evaluation, i.e. the Idea Selection process. The other steps in the FEI are

not within the scope of this report.

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Figure 2: The stages in the FEI. Adapted from Kahn (2007).

The FEI starts with Idea Genesis and Opportunity Identification as illustrated by the inwards

pointing arrows in Figure 2 above. The purpose of Idea Selection is to filter out the most

promising idea to pursue. The New Concept Development model (NCD) was introduced by

Koen et al. (2001) and explains the influencing factors in the FEI as illustrated in Figure 3.

The end goal of the FEI is a blueprint or a plan. This blueprint is then used to enter NPPD.

While consensus for the definition of FEI has not been reached and a dominant framework

has not been developed so far (Hüsig & Kohn, 2003), the NCD serves to build an

understanding of the FEI. Koen et al. (2001, pg. 47) describes the NCD in the following way:

“provides a common language and definition of the key components of the Front End of

Innovation”. The NCD model consists of five elements: Idea Genesis, Idea Selection,

Concept & Technology Development, Opportunity Identification and Opportunity Analysis.

The “engine” is driven by these five components and it represents the management of the

firm. The outer edge of the model represents the influencing factors (for example

organizational capabilities or business strategy) that affect the decision of the inner parts.

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Figure 3: The New Concept Development model (NCD). Koen et al. (2001, p. 47)

Managing the FEI is important to create new product success (ibid). Moreover, the FEI is a

place to find low cost opportunities to achieve large improvements in time to market

(Reinertsen, 1998). Kim & Wilemon (2002) define a couple of significant differences

between the FEI and the product development phase (i.e. NPPD). These differences are

highlighted in Table 1 below. It is important to note that the end result of the FEI is a

blueprint or a plan for a product while the end result of the NPPD is a finished product.

Factor Characteristics of FEI Characteristics of the Product Development phase

State of an idea Can easily change, fuzzy Specific, defined in detail

Outcome / end result A blueprint A product

Ease of rejecting the idea Low High

Budget Small/None Large, designated

Table 1: The key differences of FFE and the product development phase. Adapted from Kim

& Wilemon (2002).

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3.1.1 Idea Selection

Idea selection is the process of finding the best idea to pursue from a set of ideas. Hamilton

(1974, pg. 16) states that the purpose of Idea Selection (also known as Idea Screening) is to:

“Select from a large list of ideas the few that warrant extensive and expensive analysis”

The area of Idea Selection has been studied by multiple researchers (Hamilton, 1974;

Rochford, 1991; Bitman & Sharif, 2008; Ebner, 2009), but the application of current

approach has not been studied in a Lean Development context. This stage in the FEI that is

Idea Selection is conducted after Idea Generation and is the third and final stage in the FEI

(Kahn, 2007). The Idea Selection process is part of the Opportunity Identification process.

This process consists of two basic steps: the identification of new product ideas as well as the

screening and evaluation of these ideas (Rochford, 1991). The selection process can be

conducted by considering a set of criteria. Several authors, such as Rochford (1991), Bitman

& Sharif (2008) and Ebner (2009) have suggested criteria that can be used to evaluate ideas

for new products and R&D projects. These criteria are presented in their entirety in this

section and will be further narrowed down in the conceptual framework (the next chapter)

where these selection criteria are used to create a conceptual framework.

Bitman & Sharif (2008) conducted a study to develop a framework for R&D project ranking

with the purpose of helping firms improve their competitive advantage. The authors

conducted a literature review comparing previous multiple perspective systems for R&D

project ranking. The study is concluded by presenting a project evaluation form that can be

used to evaluate projects (see Appendix 4). The form contains five perspectives with two to

five criteria in each perspective:

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(1) Reasonableness (a) Tools needed to perform this project (b) Skills needed for the tools needed for this project (c) Facts needed to perform this project (d) Methods to perform and manage this project (e) Subcontracting needed to perform this project

(2) Attractiveness (a) Strategic fit of this project within the firm (b) Influencing actors (c) Track record of submitter of this project

(3) Responsiveness (a) Ethics of this project (b) Morality (c) Ecological implications of performing this project (d) Regulatory constraints

(4) Competitiveness (a) Capability (b) Competency

(5) Innovativeness (a) This projects improvements to technological dimensions (b) Novelty of this project (c) Research lifecycle phase (d) Idea source

Some critique has been directed towards studies of opportunity identification. Rochford

(1991) suggests that opportunity identification, as described in previous literature may be

incomplete. She suggests a multi-stage screening process in two stages. The first step

involves the initial screening criteria and is a simple, preliminary screening of ideas, which

can be achieved by asking the questions about the project, stated under Stage 1 below:

Stage 1: Initial screening criteria (1) Consistent with company objectives? (2) Do-able?

The second step is a more extensive process, where more aspects are taken into consideration.

The different parts of the secondary screening is presented below:

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Stage 2: Secondary screening criteria

(3) Market (a) Size (current and potential) (b) Growth (current and potential) (c) Appeal (d) Role for the company

(4) Product (a) Uniqueness (b) Exclusivity (patentability)

(5) Feasibility (a) Product development (b) Technology (c) Production (d) Personnel (e) Financial

(6) Compatibility of Fit with respect to: (a) Organizational infrastructure (b) Personnel and managerial experience and expertise

(i) Marketing (ii) Sales

(iii) Technical (iv) Production (v) Financial

(vi) Customer/market needs (7) Time

(a) Needed to develop the idea (b) Needed to commercialize

(8) Financial (a) Investment requirements (b) Costs (c) Profitability

(9) Other (a) Gut feel (b) Is it realistic? (c) Probability of success

Rochford (1991) further states that the most important reason for having a multi-stage

screening process is to minimize the cost (in terms of time and information required) of

evaluating the ideas. By having a more strict pre-screening (i.e. initial screening) process,

many ideas can be filtered out at a very low cost and the ideas that pass the pre-screen will be

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subjected to the more rigorous next parts of the screening process. Furthermore, the author

suggests that criteria is to be weighted on need to have and nice to have. The former refers to

the requirements the project must meet whereas the latter refers to “want”-objectives, i.e.

requirements that the projects necessarily do not need to meet, but would be beneficial.

Looking further on frameworks for Idea Selection, Ebner et al. (2009) conducted a study with

the aim of using crowdsourcing to develop a framework for community based innovation

development. The framework was developed to generate innovations, process and product

ideas by utilizing the wisdom of the crowd. An important part of the framework is detailed in

Table 2 below.

Table 2: A framework for selecting ideas. Adapted from Ebner et al. (2009).

Although the wisdom of the crowd can be powerful, Girotra et al. (2010) finds that this may

not be the case when it comes to Idea Selection. There are four factors underlying the

performance of the idea generation and Idea Selection process (Girotra et al., 2010). These

four factors are: (i) the number of ideas generated, (ii) the average quality of the ideas

generated, (iii) the variance in quality of the ideas generated, and (iv) the ability of the

selection process to discern the best idea. The effectiveness of two group structures that

require creative idea generation followed by selection were compared. A team work group

structure, where the participants work as a team in the same time and space was compared to

a hybrid structure where the participants work individually for some fraction of the time and

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then work together. The authors found that the hybrid structure was superior with regards to

all four factors except the ability of the selection process to discern the best idea. The hybrid

approach proved to be advantageous when it comes to identifying the best ideas, but when it

comes to assessing the quality of ideas, both structures proved to be weak.

The three Idea Selection methods presented by Rochford (1991), Bitman & Sharif (2008) and

Ebner et al. (2009) contain some differences, but also similarities. These three methods will

be synthesized and further analysed in the conceptual framework in chapter 4.

3.1.2 Analysis & Evaluation of Selection Criteria

The screening criteria can be used to analyse ideas from different perspectives. However,

some perspectives may be more relevant than others. For example, in a startup, it might be

more relevant to consider the time needed to develop the idea, as well as the customer benefit

and less relevant to initially consider the profitability. In other words, there is a need to

prioritize between the selection criteria. This chapter will elaborate on the subject of how to

prioritize selection criteria and present quantitative methods for how ideas can be selected

using selection criteria.

Multiple-Criteria Decision Analysis (MCDA) is a sub-discipline of operations research. The

purpose of MCDA is to evaluate multiple conflicting criteria in a decision process. In the case

of this study, models that utilize MCDA will be studied to gain an understanding of how

screening criteria can be utilized to evaluate a project. Screening models are used to evaluate

projects and find the best project to pursue. Poh et al. (2001) states that the quality of the

result is not only dependent on the project itself, but also on the method of evaluation.

Furthermore, the authors have conducted a comparative analysis of project evaluation

methods. They find that the evaluation models can be classified into two broad categories:

weighting and ranking models as well as benefit-contribution models. The most common

types of weighting and ranking methods are the Weighted Scoring Model (WSM) and the

Analytic Hierarchy Process (AHP). Common methods of benefit-contribution are economic

analysis as well as cost-benefit analysis. When comparing models in the two different

categories, Poh et al. (2001) find that the WSM and AHP are the best with regards to three

categories: simplicity, availability of data needed and adaptivity. Being that this study focuses

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on idea evaluation at an early stage, all three categories are highly important. Therefore, only

weighting and ranking method WSM. Furthermore, it has been shown that focusing too much

of the financial aspects of a project causes the project not to perform well over time (Cooper,

1999) which is a reason not to focus on benefit-contribution models.

Weighted Scoring Model (WSM)

The WSM builds on the idea that the evaluator rates the quality of an idea by assigning it a

score. The score should reflect how well the project meets the defined objectives on some

screening criteria. The WSM functions as a mathematical formula where each screening

criteria is assessed by weight. The purpose of the weight is to reflect the relative importance

of each screening criteria.

Consider n alternatives for ideas {A1, A2, ... ,An}. These ideas have m number of selection

criteria {C1, C2,...,Cm} and weights {W1, W2,...,Wm}. The performance, P, of each idea in

terms of each selection criteria has to be evaluated. This forms a decision matrix {Pij} where

Pij is a score that measures how well idea Ai performs on selection criteria Cj. Jadhav (2009)

presents a mathematical formula to calculate the score for idea Ai:

S(Ai) = ∑Wj*Pij

Where the sum is over j=1,2,..,n. The ideas can be evaluated by ranking S in descending

order.

A similar method to the WSM is the ranking model. In the ranking model, the evaluators

simply order all ideas according to their perceived qualities. A recent study by Cui et al.

(2019) suggests that the WSM strictly outperforms the ranking model in terms of the

likelihood of selecting the highest-quality ideas.

3.2 New Product and Process Development (NPPD)

When the most promising idea is selected, the next step is to turn that idea into reality. The

process of turning ideas into products is called Product Development and is a part of NPPD.

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In 1988, Cooper defined a linear process for Product Development as shown in Figure 4.

Cooper (1988) called this Product Development process the seven-step new product process.

The steps in the process are pivotal stages in which GO/KILL decisions are taken in the first

three stages of the Product Development process, (i.e. at the idea stage, preliminary

assessment and concept stage). This idea is similar to the stage-gate model that Cooper

developed a couple of years later (Cooper, 1990). During the first three steps of the new

product process, Cooper (1988) considers two main perspectives: the market and the

technical perspective. In other words, the first steps evolve around considerations about if the

project or idea is technically possible to execute and if there is a market need for the product.

Figure 4: The seven-step new product process. Adapted from Cooper (1988).

3.2.1 Lean Development

Lean Development has roots in lean production, which originates from a study of Toyota’s

production system (Womack, 1997). The purpose of Lean Development is to incorporate

continuous customer feedback into the NPPD. The first step in Product Development

originates in an idea, but Lean Development does not include Idea Selection methods or any

other methods for how the ideas should be chosen, this lies within the scope of FEI. The

methods suggested by Rochford (1991), Bitman et al. (2008) and Ebner et al. (2009) were

developed with linear NPPD in mind such as the seven-step new product process. It is unclear

whether the methods of evaluating the ideas by using a set of criteria as suggested by

Rochford (1991), Bitman et al. (2008) and Ebner et al. (2009) apply to Lean Development.

Lean Development is also known as Lean Startup because the methodology has its roots in a

startup context. Ries (2011) defines a startup as “a human institution designed to deliver a

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new product or service under conditions of extreme uncertainty”. In this thesis, a startup has

been defined as a company working on a product or service that is new in some aspect. This

newness can for example be in the form of the product itself or in the distribution of the

product. A startup is not the same thing as an incumbent company in small-scale, usually a

startup doing something different than the incumbents of the market.

The concept of Lean Development has been defined by taking inspiration from York et al.

(2014, pg 21) as:

“An approach to entrepreneurial and innovative activities that emphasizes placing resources

into the creation of customer value, viewing all other activity as waste until a fit is found

between the product and the intended market“

In contrast to the linear seven-step new product process, iterative Product Development

Processes like Lean Development can be utilized to avoid failure in innovation processes. As

research shows, 75% of all startups fail (Blank, 2013) This method can make the process of

starting a company (and launching new products) less risky (Blank, 2013). Lean

Development can also be applied to ideas and projects within companies. Lean Development

can be illustrated as an iterative process with three parts: (1) building a product, (2)

measuring and collecting feedback and (3) learning from the feedback (Ries, 2013). This

process is illustrated in Figure 5 below.

Figure 5: Three parts of Lean Development. Adapted from Ries (2013).

It is impossible to know beforehand whether a new product idea will be successful or not.

Therefore, it can be argued that it is unnecessary to spend too many resources on analysing if

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the idea will be successful, given that the cost of testing a minimal version of the idea is low

waste. If this is the case, instead of conducting rigorous analysis, a simple version of the

product can be built and tested to get real feedback from the market. Collis (2016) argues for

conducting a relatively simple analysis to understand which ideas should be tested by

building a minimal version of the product according to the principles of Lean Development.

The Lean Development approach aims to reduce risk in new business development by

replacing the traditional business plan with a list of hypotheses to be verified and swapping

the entrepreneurs assumptions with customer feedback (Girgenti, 2016). Girgenti (2016)

articulates the value of customer satisfaction and value generation. The authors propose a

novel approach to systematically build a customer development model with the purpose of

verifying that what is offered meets the customer need. The model builds on generating an

idea, developing a Minimum Viable Product (MVP) and then gathering feedback analysis

and pivoting. A MVP is a very simple version of the product that can satisfy a customer's

needs. This process can be applied within the NPPD as illustrated in Figure 6 beneath.

Figure 6: Lean Development in the NPPD. Adapted from Girgenti (2016).

Clement (2019) discusses the need for a MVP and the $100-million mistake

Excelsior-Henderson motorcycles made by not applying a Lean Development process and

thereby allowing a small mistake to become a mistake of catastrophic proportions. The

company was founded based on the premise that a need exists for Harley-Davidson-like

motorcycles. This assumption of the demand was based largely on the success of market

leader Harley-Davidson and their inability to meet the high customer demand.

Excelsior-Henderson never developed a MVP to verify the high customer demand. Blank

(2013) explains this way of starting a business as doing it in stealth-mode. This refers to the

process of developing a business plan, raising capital based on the assumption that the

business model will be executable and then try to execute the business model without

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customer or market feedback. If Excelsior-Henderson had developed a MVP to test the

hypothesis of high market demand for Harley-Davidson-like motorcycles, they might have

discovered that there was no market demand for Harley-Davidson-like motorcycles but

instead a high demand for Harley-Davidson motorcycles.

One reason why so many startups fail can be that they operate in stealth-mode. During the

dot-com boom, many companies operated in stealth-mode. This meant that the product

development process was very secretive to avoid alerting potential competitors to a market

opportunity. Prototypes would only be tested during carefully orchestrated “beta” tests. The

Lean Development approach makes the concept of stealth-mode obsolete because in most

industries, customer feedback matters more than secrecy and constant feedback yields better

results than keeping the product unknown to competitors (Blank, 2013). The Lean

Development approach is to test hypotheses iteratively and fail quickly.

3.2.2 The Three Key Principles of Lean Development

Blank (2013) states that there are three key principles of the Lean Development method: (1)

The Business Model Canvas (and the Lean Canvas), (2) Customer Development and (3)

Agile Development. These principles are presented below.

The Business Model Canvas and the Lean Canvas

Rather than spending months of planning and researching, i.e. starting a business in

stealth-mode, entrepreneurs should embrace the fact that all they have when starting out is a

set of untested hypotheses about customers, a market and products. Instead of spending an

excessive amount of time on writing a detailed business plan, Blank (2013) suggests that the

entrepreneur should summarize their thoughts in a framework called the business model

canvas (BMC). Osterwalder & Pigneur (2010) introduced the concept and it outlines nine

building blocks; customer segments, value propositions, channels, customer relationships,

revenue streams, key resources, key activities, key partnerships and cost structure. The

authors state that a business model can be described through these nine basic building blocks

and these can also show how a company intends to make money. Moreover, Osterwalder &

Pigneur (2010) define a business model as a model that describes the rationale of how an

organization creates, delivers, and captures value.

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Blank (2013) argues that business plans rarely survive first contact with the customer.

Therefore spending too much time on building a detailed business plan and planning for

events that will never occur is a waste and one purpose of Lean Development is to eliminate

waste. In the case of the Lean Startup, this means not wasting time on making a detailed

business plan, because the business plan will likely change before any of the planned-for

events occur. As the boxer Mike Tyson once said about his opponents’ pre fight strategies:

“Everybody has a plan until they get punched in the mouth.”

-Mike Tyson

From the Business Model Canvas, a similar model called the Lean Canvas has emerged.

Maurya (2012) has adapted the BMC to visualize an hypothesis in a startup context. The

Lean Canvas is illustrated in Figure 7 beneath.The differences between the BMC and the

Lean Canvas is the focus on the Problem instead of Key Partners, Solution rather than Key

Activities, Key Metrics instead of Key Resources and the perspective of an Unfair Advantage

rather than Customer relationships. The reasons for the shift in focus on some perspectives is

to adopt the BMC to a startup setting. The Lean Canvas main purpose is to evaluate business

ideas, not necessarily product ideas.

Figure 7: The Lean Canvas. Adopted from Maurya (2012).

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Customer Development

The search of a business model that works is called Customer Development (Blank, 2013).

Customer discovery is related to this and refers to the process of capturing the vision of the

entrepreneur and turning this into a hypothesis that can then be proven, or disproven - in

which case a new hypothesis if formed and tested. The process of customer validation tests if

the business model is repeatable and scalable. If not, the startup pivots and goes back to the

process of customer discovery. Once a business model is validated, the startup can exit the

search phase and continue building and developing the idea by moving on to the execution

phase. Customer creation is the process of building end-user demand and scaling the

business. Lastly, company building is the process of transitioning the business from a startup

to a company focused on executing the validated model (Ries, 2008). This process is

illustrated in Figure 8.

Figure 8: The Customer Development process. Adapted from Blank (2013).

The process of hypothesis valuation can be defined by the key concepts of validated learning,

minimum viable product (MVP) and the strategy of “getting out of the building” (Batova et

al., 2016). Validated learning is the process of learning what the end customer really wants.

The purpose of this is to avoid wasting time and money by planning, developing and

marketing a product that the end customer does not actually care about. This process is

similar to what Blank (2013) describes as customer discovery. Another key concept of

hypothesis valuation is the MVP. Batova et al. (2016) defines a MVP as a product or service

to be developed that has the smallest number of features for which the customer would be

willing to pay. A MVP is created by minimum effort and is rarely perfect. The purpose of

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doing this is to test whether a customer wants or needs a service. Lastly, a cornerstone of a

lean startup is to “get out of the building”. The purpose of this is to counteract the

confirmation bias, i.e. the tendency to search for, interpret, favor, and recall information in a

way that confirms or strengthens one's prior personal beliefs or hypotheses (Plous, 1993). The

confirmation bias can be counteracted by talking to potential customers; getting out of the

building and talking to real people. The goal is to get feedback in the initial stages of the

process to avoid spending resources on creating a product that no one wants (Batova et al.,

2016).

Agile Development

According to Qumer and Henderson-Sellers (2006), agility is defined as the ability to

accommodate and adapt to changes in a dynamic environment. Jyothi and Rao (2012) states

that being agile is to apply previous knowledge while learning from current experience in

order to deliver high-quality products, under budget constraints and in short time frames.

Agile development has its roots in the software industry. The Agile Manifesto is a document

authored by Fowler et al. (2001) that outlines the four core values of agile development:

● Individuals and interactions over processes and tools

● Working software over comprehensive documentation

● Customer collaboration over contract negotiation

● Responding to change over following a plan

These four values can be adapted to work with the theory of the lean startup and works

hand-in-hand with customer development (Blank, 2013). This process is illustrated in

Appendix 5. Even though the four principles were developed to improve the software

development process, the principles can be translated to a more general sense. For example,

working software over comprehensive documentation can mean that it is more important to

have a working product than an in detail instruction manual. By developing the product

iteratively and incrementally, agile development eliminates wasted time and resources instead

of having long product development cycles that are more reminiscent of a company operating

in stealth-mode.

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4. Conceptual Framework

For the sake of answering the research question, a conceptual framework is derived by

combining theories of Idea Selection in the FEI and the theory of Lean Development from the

NPPD. The end result of the conceptual framework is a model in the form of a framework

that is applicable for Idea Selection. Arguments for why the components of the framework

are relevant are also given.

To answer the MRQ, a method to evaluate ideas in a Lean Development context is needed.

As presented in the previous section, several authors have suggested methods to enhance the

Idea Selection process (Rochford, 1991; Bitman et al, 2008; Ebner, 2009) - but these methods

are not adapted to a Lean Development context. Following this, the purpose of this

conceptual framework is to adapt these methods to a Lean Development context. An

illustration of the scope of the study is given in Figure 9 beneath.

Figure 9: Relevant areas for the conceptual framework

The Idea Selection process is different in a linear context compared to in a Lean Development

context; mainly because in a linear context, the process of Idea Selection and evaluation is a

one time, non-recurring event. On the other hand, in a Lean Development context the process

of Idea Selection and evaluation is a recurring event. The context of the conceptual

framework that is proposed by the researcher is presented in Figure 9 below. This framework

consists of two main parts: (1) a pre-screening of ideas to reduce the size of the initial pool of

ideas and (2) an Idea Selection process adapted for a Lean Development context.

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Figure 10: The context of the conceptual framework for Lean Development Idea Selection

Step (1): As illustrated in Figure 10, the conceptual framework starts with a Large Pool of

Ideas. These ideas are then subjected to a pre-screening. In this step of the process, a

multistage selection process as proposed by Rochford (1991) can be utilized to make the

selection more efficient. This process serves to quickly sort out ideas that should not be

pursued. The pre-screening consist of asking three basic questions:

(1) Is this idea consistent with company objectives?

(2) Will this idea serve to increase revenue?

(3) Is the idea do-able?

Question (1) have been formulated with inspiration from Rochford (1991) and Bitman &

Sharif (2008), who both argue that an important factor to consider is the strategic fit to the

firm of the proposed project. The second question was inspired by the research of Ebner et al.

(2009). The author argues that an important dimension for evaluation is market potential. The

dimension of market potential can be captured in the potential revenues. Lastly, the third

question was inspired by Rochford (1991).

Step (2): The Idea Selection process is conducted by evaluating a set of criteria. These criteria

are presented in Table 3 below and should be evaluated on a scale from 1-5, where 1

corresponds to completely false and 5 corresponds to completely true. The selection criteria

presented by Rochford (1991), Bitman et al., (2008) and Ebner (2009) display four common

themes: Market potential, Impact, Probability of success and Effort. These themes are similar

to the RICE-framework proposed by (McBride, 2016).

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Theme Criteria Source

Reach Market size

Rochford (1991), Ebner et al. (2009)

Potential for market growth Rochford (1991)

Impact Customer benefit Ebner et al. (2009)

Competitiveness Bitman & Sharif (2008)

Confidence Profitability of success

Rochford (1991), Ebner et al. (2009)

Personal experience Bitman & Sharif (2008)

Effort Time and cost of execution Adapted from Rochford (1991) Table 3: Proposed selection criteria

Reach: This theme describes the number of customers included in the potential users for the

new product. The potential future growth of the market is also included. Rochford (1991) and

Ebner et al. (2009) bring attention to the criteria of a large market size and Rochford (1991)

also includes the criteria of an attractive future market.

Impact: The second theme describes what impact the new product will have on the intended

customer. The Impact can be measured in the perceived customer value and the degree of

how advantageous the new product is compared to alternatives (competitiveness). Bitman &

Sharif (2008) argues that an important criteria for Idea Selection is the benefit of increased

competitiveness. In other words, the question regarding whether the new product will have an

impact on the customer that is bigger than the impact that the competitors products have

should be considered. Moreover, the criteria of high customer benefit as suggested by Ebner

et al. (2009) has been included because it reflects the impact that the product will have on the

customer.

Confidence: Thirdly, the Confidence perspective serves to reflect the probability of success

if the product is developed. An iterative Lean Development process allows for continuous

learning and therefore the Confidence in the idea can be increased when assumptions about

Reach, Impact and Effort are verified. The confidence is reflected by the probability of

success, which is a selection criteria proposed by Rochford (1991) and Ebner et al. (2009).

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Also, Bitman & Sharif (2008) suggest that a selection criteria should take into account the

track record of the submitter of the project. This criteria also serves to reflect the confidence.

Effort: Lastly, the Effort perspective describes the amount of work that has to be done to

develop the product. The effort is measured in both the cost of execution and the time needed

for execution as suggested by Rochford (1991).

To evaluate these criteria in a quantitative manner, a study conducted by Poh et al. (2001)

suggests that the WSM is the best when it comes to three categories: simplicity, availability

of data needed and adaptivity. Therefore, this model has been chosen to prioritize the ideas.

By letting a weight represent the importance of each criteria, the WSM can be used. The

weight should be a value ranging between 0.5 and 1.5 as illustrated in Table 4. The value of

0.5 means that the criteria has the lowest importance and 1.5 means that the criteria has the

highest importance. These weights will be different depending on the organisation.

Value of weight Importance of criteria

0.5 Low

1 Medium

1.5 High

Table 4: Weights and importance - the value of the weight signifies the importance of the

criteria

Step (3): The next and third step in the conceptual framework for Idea Selection is to test an

hypothesis. The purpose of this is to prove or disprove assumptions about the idea. These

assumptions relate to one of the main themes. When the test has been conducted, a decision

has to be made whether to continue developing the project or not. To decide this, the Idea

Selection process is conducted again. If there is another opportunity that is more promising,

that opportunity should be pursued. This is an agile iterative process to test a MVP.

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5. Research Design and Methodological Choices

In the following chapter the methodology of the study is presented, with a starting point in

describing the selection of research design. Secondly, the details of the research design are

addressed. Thereafter, the quality of the research and the ethical considerations are

discussed.

5.1 Research Design

In order to answer the research questions, an exploratory case study has been conducted. This

was considered suitable as the thesis is conducted in a fairly unexplored research area. Even

though research in the fields of innovation, FEI and Idea Selection are not unexplored, Lean

Development methodology is relatively unexplored. Due to this, the research area is not

subject to a large amount of research. An exploratory approach is appropriate in cases when

studying an area that has been subject to little research (Blomkvist and Hallin 2014; Yin

1994). Adding to this, an exploratory approach was appropriate as it expands the

understanding of the phenomenon and contributes to building theory (Eisenhardt, 1989).

The study consists of two main parts. The first part consists of a pre-study that includes an

explorative study as well as a literature study. The second part consists of a case study and

expert interviews. To refine the conceptual framework for Idea Selection in a Lean Context,

expert interviews with employees at Hedvig were conducted. The refined framework was

then applied to an idea at Hedvig selected from a set of ideas collected at Hedvig as part of

the case study. Figure 11 outlines the research design.

Figure 11: Research design

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5.1.1 Part 1: Pre-study

The purpose of the pre-study was to form a better understanding of the research environment

and find a relevant research question. Moreover, the pre-study is effective in helping

outlining the direction of the research (Blomkvist and Hallin. 2014).

During the pre-study, the researcher acted as an insider of the company where the case was

conducted. This was done in part by initiating unstructured conversations with employees,

managers and supervisors but also by taking part in regular meetings. The advantage of

acting as an researcher was that the researcher was granted access to the main communication

channel of the company and internal documents. This was used to form a better

understanding of the relevant problems at Hedvig that could be translated into a research

question. Also, this contributed to a better understanding of the relevant scope. The

disadvantage of acting as an insider was that it made it more difficult to stay objective in the

research process. Furthermore, a literature study was conducted in order to create the

theoretical and conceptual framework and to understand the current state of the research field.

Recent articles in the field of research were studied to build a broader understanding of a

relevant scope for the study.

5.1.2 Part 2: Case study and Expert Interviews

A total of 12 interviews were conducted and seven of these were conducted with experts in

the field. The purpose of the latter was to gather information needed to refine the framework

for Idea Selection. The conceptual framework was applied to an idea that came from a set of

ideas collected at Hedvig. The reason for doing this was to better understand how ideas can

be evaluated and to validate the framework in a real-world setting. This allowed the

researcher to validate and test the framework in a real-world setting. Furthermore, by

conducting the case study, the researcher gained exposure to the NPPD and learned more

about how Lean Development affects the Idea Selection process. One idea from the set of

ideas was selected to explore further. This was done in accordance with the desire of the

management team at Hedvig and because this idea was most interesting to explore using the

suggested framework. This single idea was evaluated by using the framework and user

research for this idea was conducted to learn more about the Idea. The user research consists

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of five interviews used to analyse the opportunity. This process is illustrated in Figure 12.

Figure 12: Steps of the case study

The main reason for conducting a case study is that it is well-suited for reaching answers to

“how” and “why” research questions. Moreover, case studies are useful when focusing on

contemporary events (Yin, 1994), which holds true for this thesis. Yin (1994) also states that

it is very important to state the propositions of the study. If an exploratory case study is

conducted, Yin (1994) argues that a clear purpose of the case study should be stated. The case

study conducted in this thesis is of exploratory nature and the purpose of it is to understand

what methodologies in Lean Development and Idea Selection can be applied and is applied in

a real-world setting. The result of this thesis will therefore become more meaningful, since it

can be applied at other startups.

Yin (1994) acknowledges that a single case study is suitable when researchers are

investigating an extreme example, wants to gain unusual research access or have the

opportunity to investigate a particular phenomena under rare circumstances. The lastly

mentioned is something that Eisenhardt and Graebner (2007) acknowledge as well. The case

study is a single case study focusing only on Hedvig and investigating the phenomena of Idea

Selection in the Product Development process of an early-stage startup. Since this

phenomena has not been studied in a real-world context to a large extent, a single case study

will make a relevant research contribution. A single case study can not make an equally

strong foundation for theory building as a multiple case study (Eisenhardt and Graebner,

2007). The same authors also state that a multiple case study can provide broader exploration

of the posed research question and also generate a more vigorous theory. On the other hand,

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Yin (1994) argues that a single case study is generalisable to theoretical proposition and

therefore a single case study can provide valuable contributions to the field of research.

A linear workflow with planned phases does not highlight all the potential advantages from

case research (Dubois et al., 2002), but the process of going back and forth between empirical

and theoretical activities does. This process is called systematic combining. This approach

can create a greater responsiveness to the observed phenomena (Blomkvist et al., 2014). The

empirical findings from the pre-study, as well as the observations made from acting as an

insider and the literature study have served to continuously form and develop the evolving

case study. By alternating between theory and practice, a deeper insight of the studied subject

area was developed.

5.2 Data Collection

The primary data, i.e. the data collected specifically for the investigation at hand, was

collected by semi-structured interviews. This enabled a flexible approach and allowed for

new ideas and questions to be brought up during the interviews.When the studied phenomena

is episodic and infrequent, interviews are a highly efficient way to gather important empirical

information (Eisenhardt and Graebner, 2007). This is in line with new product development

and innovation in a highly innovative, early startup environment. Thus, the primary method

for data collection has been through interviews, but to broaden the empirical material,

relevant observations at the case-company have been gathered. The empirical material is

displayed in Table 5. The researcher spent about two days per week at the offices of the case

company for the first two months of the study. Because of the COVID-19 epidemic, the

offices of the case company were closed and less observations could be collected.

Nonetheless, the researcher continued to participate in meetings online and over video-chat,

but a degree of natural observations was lost.

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Component Description Scope Documentation Purpose

Observations Natural observations that have been noted in a Journal

Six observations in Journal and notes from meetings

Notes in text Forming relevant RQ, learning about the subject and Hedvig

Internal documents

Presentations and product demos

Three internal documents of relevance

Original format (power point)

Forming relevant RQ, learning about the subject and Hedvig

Expert interviews

Interviews with employees at Hedvig involved in Product Development or Management

Two interviews (20-30 min each)

Notes from interviews

Develop framework for Idea selection, Pre-study

Expert interviews

Interviews with employees at Hedvig involved in Product Development or Management

Five semi-structured interviews (approx. 40 min each)

Recordings and notes

Refine framework for Idea Selection

Idea survey A survey made at Hedvig with the purpose of collecting new ideas

Approx. 46 ideas Responses in text format

Applying the framework for Idea Selection

User interviews Short interviews with users

Four semi-structured interviews. Six questions

Answers in text Applying the framework for Idea Selection

Table 5: Empirical material used in this study

Eisenhardt (1989) argues that it is advantageous to simultaneously collect data when

performing theory building from a case study. This allows the researcher to adjust and adapt

the case study as the study progressed. Accordingly, interview data was analysed after it was

collected and thereby giving the researcher the opportunity to adjust or investigate further

bases on the findings.

5.2.1 Interview data

Interviews are a suitable method to develop in-depth understanding of the studied area, find

new dimensions as well as ambiguity (Blomkvist and Hallin, 2014). Thus, interviews with

stakeholders in different positions were interviewed. Hedvig can be divided into three main

functions: technology and development, product as well as business and strategy.

Stakeholders from each of these functions were interviewed.

For the purpose of the pre-study, an unstructured method was used to form a better

understanding about Hedvig as a company and finding a relevant scope for the thesis.

Unstructured interviews are suitable for exploring an unknown subject in the early phase of

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the empirical work (Blomkvist and Hallin, 2014). Ritchie et al. (2013) suggests that an

unstructured interview method gives the interviewer room to open up for questions and

turning the interview into more of a free dialogue. This was the case for the pre-study

interviews and allowed the researcher to adapt and adjust the focus of the questions as the

interview was taking place. For the interviews that focused on understanding the process of

Idea Selection and Product Development, semi-structured interviews were conducted. The

reason why a semi-structured approach was chosen is because this allowed the researcher to

adapt the interviews to focus on topics related to the relevant scientific theory of this thesis,

but still remaining flexible (Yin, 1994). Furthermore, in conjunction with the case study,

semi-structured interviews were conducted with potential users from Hedvig’s target

customer group. In total, 12 interviews were conducted. Moreover, in accordance with

Blomkvist and Hallin (2014), the semi-structured interviews conducted with the purpose of

understanding the process of Idea Selection and NPPD were audio recorded and notes were

taken. The user interviews were conducted in multiple ways, for example, face-to-face, over

the phone and by using Slack. This is Hedvigs main tool of communication and functions like

a chat-board.

Eisenhardt and Graebner (2007) point out that there is a risk of interview data being biased

because the interviewer might try to retrospectively reinterpret the data to fit certain notions.

The authors suggest interviewing several people with different perspectives on the studied

area. This might for example mean interviewing people from different levels of the

organisation or from different functions. In purpose of mitigating potential biases, people

who work in different functions were interviewed. Also, people in leading positions with

CXO titles were interviewed as well as interns and lower level employees. The participants in

the expert and user interviews are outlined in Table 6. The format Framework for Idea

Selection follows a semi-structures approach with three main areas of questions:

(1) About the person, their role and about Hedvig

(2) Ideation and screening of ideas

(3) Product development process

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Focus was on the second question and the format is further outlined in Appendix 6. The user

interviews also followed a semi-structured format as outlined in Appendix 7. The users were

chosen either because they had experience in the field from working at Hedvig, or because

they were a person in Hedvigs target group.

Interviewee Role Number of interviews

Format

Manager 1 Executive 1

Framework for Idea Selection

Manager 2 Executive 2

Pre-study, Framework for Idea Selection

Manager 3 Executive 1

Framework for Idea Selection

Manager 4 Technology & development 2

Pre-study, Framework for Idea Selection

Manager 5 Technology & development 1

Framework for Idea Selection

User 1 Employee 1 User feedback

User 2 Employee 1 User feedback

User 3 Employee 1 User feedback

User 4 Potential user 1 User feedback

User 5 Potential user 1 User feedback

Table 6: Interview participants

5.2.2 Observations and Secondary Sources

The data gathered in these interviews was also completed with data gathered from smaller

interactions with employees at Hedvig, as well as the researchers partaking in meetings.

Relevant insights were documented in a journal that the researcher has had handy throughout

the study. Furthermore, during the case study, the researcher had the chance to learn how to

use tools that Hedvig use in the product development process. For example, one of these tools

is Figma, which is a prototyping software. While learning how to use this, the researcher was

instructed by employees at Hedvig and the researcher was able to gain insights in NPPD from

learning this tool.

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During the project, the researcher gained access to internal documents. These documents

included user research, product development processes and strategic business analysis. By

taking part of these documents, the researcher gained insight in how Hedvig has worked with

NPPD historically. The set of ideas was collected from an internal study made by the product

team at Hedvig. These ideas were collected by asking Hedvig employees the following four

questions:

1. What features do you think our members really appreciate?

2. What do you think are the members' biggest pain-point of using Hedvig today?

3. What features would our members be really excited about?

4. What features are you really excited about?

The survey yielded answers with a total of 46 ideas The ideas were categorized into six

categories as illustrated in Table 7 below.

Category Definition Example

New Insurance Offering (NIO)

Involves the type of the underlying insurance product

Weather insurance

General Improvements (GI)

Incremental improvements to the core product or offering

Coverage of more expensive items

Claims

Relates to how the customer makes claims

The ability to make a claim on the web

Onboarding

Relates to the onboarding process

More discount codes

Information accessibility

Involves improvements in how customers access information

Visualisation of insurance terms

Other

Not covered by any of the other categories

Offer a personal butler

Table 7: Categorization of ideas

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5.3 Research Quality

Collis and Hussey (2013) state that for quantitative research, reliability refers to accuracy in

measurements and likelihood of identical results if the research is performed by another

researcher. Being that the thesis is conducted as a case study, an exact replication of the

findings is hard to achieve. Thus, reliability is not reached in a similar way as for

quantitative research (i.e. being replicable). Transparency is achieved in the research as the

different parts and steps of the methodology is described in detail, providing the reader a

good understanding of how the study has been conducted. Also, the process of recording and

transcribing the interviews further strengthens the reliability of the results.

During the research, Validity was intended to be attained by the combination of external

interviews and the empirical material, as this enables for triangulating the data and gathering

information from different sources. Moreover, the continuous dialogue and close relationship

with Hedvig enabled that the findings were validated further. Due to the qualitative nature of

the study, it is problematic to generalize the results with high certainty. Nonetheless, the level

of generalizability was increased by including several, independent respondents in the case

study (Blomkvist and Hallin, 2014). Validity can be defined as the extent of tests measuring

what they are intended to measure and to what extent the results of the test reflect the studied

phenomena (Collis and Hussey, 2013). Moreover, the degree of truthfulness of the results can

be considered in addition to this as suggested by Golafshani (2003). Thus, the research results

can not be subject to manipulation in order to maintain the integrity of the research.

5.4 Research Ethics

Ethics and integrity have been taken into consideration during the research process.

According to Blomkvist and Hallin (2014), the most common ethical codes within social

science in Sweden are the principles of the Swedish Research Council. The research has been

conducted in agreement with the formal guidelines of the Swedish Research Council’s

“Principles of Research Ethics” as follows:

(1) Information Requirements

The researcher should inform the interviewees about the purpose of the study.

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(2) Consent Requirements

Interviewees in the study should decide on their own participation.

(3) Confidentiality Requirements

Information about all interviewees shall be given the greatest possible confidentiality

and personal data must be stored in such a way that unauthorised persons cannot

access it.

(4) Utilisation Requirements

Data collected shall only be used for the research purpose.

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6. Findings & Analysis

In this section, the findings and analysis are presented based on the collected empirical

material. Firstly, the components of the Framework for Idea Selection as well as how to

implement it is described. Then, the framework is applied to an idea at Hedvig to validate the

framework in a real-world setting.

6.1 Components of the Framework for Idea Selection

In this section, the findings from the expert interviews are presented and connected to the

theoretical material presented in the conceptual framework. First, the components of the

conceptual Framework for Idea Selection are presented again. Secondly, the findings from

the expert interviews are presented structured according to the four themes: Reach, Impact,

Confidence and Effort. Lastly, the implementation of the full final framework is described.

The aim of this section is to connect the expert interviews with the conceptual framework.

The conceptual framework for Idea Selection (first presented in chapter 4) is illustrated in

Table 8 below and contains four main themes: Reach, Impact, Confidence and Effort.

Theme Criteria Source

Reach Market size

Rochford (1991), Ebner et al. (2009)

Potential for market growth Rochford (1991)

Impact Customer benefit Ebner et al. (2009)

Competitiveness Bitman & Sharif (2008)

Confidence Profitability of success

Rochford (1991), Ebner et al. (2009)

Personal experience Bitman & Sharif (2008)

Effort Time and cost of execution Adapted from Rochford (1991) Table 8: Proposed selection criteria, conceptual framework for Idea Selection

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The components of the conceptual framework have been refined to fit in the Lean

Development context of a startup. To achieve this the empirical findings have been

incorporated into the framework.

6.1.1 Findings from Expert Interviews

In this part, the expert interviews conducted in the case study are introduced. The material is

presented by using the four common themes presented in the conceptual framework: Reach,

Impact, Confidence and Effort. For each theme, selection criteria formulated using the

interview data is presented. In Table 9, a summary of the criteria is described.

Theme Criteria Source

Reach

Potential number of users Manager 3

Number of touchpoints Manager 1

User acquisition Manager 1, Manager 2,

Manager 4

Impact Customer benefit Manager 3

Confidence Personal experience Manager 1

Effort Possibility to experiment Manager 2

Number of stakeholders involved Manager 5

Table 9: Findings - Selection criteria derived from expert interviews

Reach

Potential number of users

Support for this criteria is found in the empirical material as well as the theoretical. This

criteria is relevant to consider because it directly relates to one of the main KPIs at Hedvig:

gross written premium (GWP) (Manager 3). The GWP is the total premium written by an

insurer before deductions for reinsurance and ceding commissions. One can think of GWP as

sales and a large market, with many potential users, entails high sales.

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Number of touchpoints

Another criteria to consider is the number of touchpoints that the new product has. A

customer touchpoint occurs when a customer interacts with the product. A very good product

has a large number of potential users and has the potential to be used frequently. When new

product ideas are considered, unrealistic use-case scenarios are imagined and it is important

to stop and ask how often the imagined use-case actually occurs (Manager 2). When making

this point, the interviewee suggests an idea for product that is very useful in a very specific

scenario and makes the point:

“[...] but how often do the stars align and that exact scenario happens?” (Manager 2)

User acquisition

An important aspect of creating reach is virality. Several interviewees reflect on the

importance of creating virality in connection to user growth. One interviewee states:

“We are mostly focused on creating viralty and growth.” (Manager 4)

Further supporting this is the fact that one of the main KPIs at Hedvig is how efficiently

customers can be acquired (Manager 3). This is measured in payback time:

“The single most important factor [to consider for future growth] is the equation

between how much we pay to acquire a customer and how long it takes for us to

recover that cost.” (Manager 1)

Creating virality is a way of connecting with the potential users included in the reach of a

new product. Just because a product has a reach of a certain number of users, does not mean

that these users will actually use this product. The company that has created the product

needs to acquire the potential users to turn them into actual users. This can be done for

example by paid marketing or very cheaply and efficiently by creating virality. On this

subject, in relation to evaluating ideas, one of the interviewees note:

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“What should we do next, in terms of product development, that will set us apart and make us viral? How can we create a sort of news value in the product offering?” (Manager 2)

At Hedvig, creating virality is important because it contributes to organic user growth. This is an efficient, cheap and sustainable way of acquiring users. Hence, the criteria of user acquisition has been included.

Impact

Customer Benefit

One of the interviewees states that there are two ways of creating successful products. Either

by creating a high-functionality product or by creating a product surrounded with a strong

sense of community as illustrated in Figure 13. Apple is an example of a company that has

succeeded with the latter. One of the interviewees makes this point and says:

“The MacBook is an inferior computer to the ThinkPad under the shell and it is more

expensive, but it has a glowing Apple on the front of it.” (Manager 2)

Apple is known for their strong sense of community and that’s one of the reasons why the

MacBook is a more popular laptop than the ThinkPad. One of the ways Hedvig creates

community is by sharing their vision and building products to reflect that vision. On this

subject, one interviewee states:

“We have to support Hedvig’s long term identity” (Manager 2)

The other way of creating successful products is to create high-functionality products. A

high-functionality product is synonymous with a product with a high degree of usefulness.

An example of a product with high-functionality and a low sense of community is the

microwave oven. Few associate their microwave oven with a sense of community, but most

would probably agree that it is very useful.

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Figure 13: Community and functionality are important parameters for creating successful

products

One of the four main KPIs at Hedvig is retention and this is measured in the number of

months that the customer is expected to stay (Manager 3). Hedvig is a monthly subscription

service and the customer can choose to cancel their subscription any time. Therefore, if

Hedvig does not provide high enough customer benefit, either in terms of functionality or

community, the customers will cancel their subscriptions. For this reason, retention is a

measurement of the customer benefit.

Confidence

Personal Experience

As described above, the purpose of the confidence theme is to estimate the certainty of the

assumptions made when considering the other selection criteria. One way to do this is by

considering the personal experience that the individual (or team) that suggested the idea have.

On the subject of evaluating ideas, one interviewee from the management team states:

“There must exist an inherent system for assigning more weight to [the opinion of] a

person who is more believable within the subject.” (Manager 1)

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The interviewee further justifies this statement by explaining that someone who is believable

is someone with experience who can explain how something has been executed in the past. A

way of judging the confidence is by considering the track record of the individual (or team)

that suggested the idea.

Effort

Number of stakeholders involved

The effort it takes to execute a project is not a function solely dependent on the consumed

resources, but it also depends on the complexity of the project. A high number of

stakeholders involved in the project will raise the complexity of the project (Manager 5).

Therefore, it is relevant to consider the number of stakeholders involved in the project when

evaluating the effort. A stakeholder can for example be in the form of external partners,

internal teams or employees involved in the project.

Possibility to Experiment

When considering the effort it takes to execute the project it is important to define the scope.

The scope can for example be to fully finish the project and launch the final product, or the

scope can be to develop a MVP. Some products are better suited than others for

experimenting. When asked about how one of the interviewees think about cost and benefit

of new product development, the interviewee explained that they do not necessarily use the

ROI-perspective when considering new ideas, but instead consider:

“What is the minimum thing that we can build so that we learn more about this?”

(Manager 2)

Effort can be considered in terms of evaluating the effort of developing the finished product

and comparing this to the potential rewards. Another way is to consider the effort to develop

a MVP and compare this to the potential information gain or learnings.

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6.1.2 The Components of the Final Framework for Idea Selection

The components of the final framework for Idea Selection is presented below in Table 10.

The framework contains the four themes (Reach, Impact, Confidence and Effort) derived

from the conceptual framework and the empirical material. The criteria used in the

conceptual framework have been merged with the criteria that has emerged from the expert

interviews. Moreover, some criteria have been merged to make the criteria in the framework

as close to mutually exclusive as possible and more clear.

Theme Purpose Criteria

Reach How often will this product be

used?

Potential number of users

Potential future users

Number of touchpoints

User acquisition

Impact How much value does this

product bring users? Customer benefit

Competitiveness

Confidence How confident are we in our

assumptions? Probability of success

Personal experience

Effort What will it take to realize this

product?

Possibility to experiment

Time and cost to execute

Number of stakeholders involved

Table 10: Components of the final framework for Idea Selection

Reach: The Criteria within this theme is aimed at estimating how often the product will be

used. This is a function of the number of potential users, how many of these users that can be

acquired and the number of touchpoints (i.e. how often the users interact with the product).

Furthermore, Rochford (1991) suggested the potential for market growth as a selection

criteria and therefore the potential future users are also considered.

Impact: The purpose of this theme is to understand how much value the product can bring to

the users. This value is measured by considering the customer benefit in terms of the

functionality that the product provides and the sense of community. Moreover, the

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competitiveness of the product should be assessed. If there are many competing products or

substitutes that satisfy the same need or solve the same problem, the value of the product that

is being evaluated is far less.

Confidence: The probability of success and the personal experience of the individual with

the idea is evaluated to understand the level of confidence in the assumptions made in the

evaluation. When considering the probability of success, it should be considered if the skills

and tools needed to execute the project exist. The probability of success should be an estimate

of the likelihood of succeeding with executing the project in the scope of the effort as defined

in the next theme. The confidence level can be raised if an experiment has been conducted as

explained in the next theme.

Effort: To raise the confidence level, an experiment can be conducted by building a MVP. In

accordance with Lean Development, assumptions can be tested by building a MVP and

thereafter gathering feedback. This way, if certain assumptions are tested, the confidence

level can be raised. For this reason, the possibility to experiment should be evaluated. Some

product ideas allow for a large degree of experimentation while others do not. If assumptions

can be easily tested, this can be highly valuable. Furthermore, the time needed and the cost of

building the MVP should be considered. What is more, if many stakeholders are involved,

this will raise the complexity of the project and therefore the effort.

6.1.3 Implementing the Framework

The components of the framework have been established by using the conceptual framework

and the empirical material. This section aims to explain how the framework can be used in a

startup to evaluate ideas and how to select the most promising ideas to pursue.The first step

in using the framework is a pre-screening process. The pre-screening consist of three simple

questions:

(1) Is the idea consistent with company objectives?

(2) Is this product solving a problem?

(3) Do I have this problem or do I know anyone that has this problem?

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The purpose of having a pre-screening is to filter out ideas at a very low cost. The first

question is inspired by Rochford (1991) and serves to answer if the idea is relevant to the

company in question or not. Hedvig set up strategic goals that they are working towards.

These goals are called stones and can be for example expansion to a new market or a

significant update of the user interface (Lucas). Some ideas can be for products relating to an

existing stone or can mean entirely new stones. It is important to consider how (and if) the

product fits in strategically with the stones. The second question is inspired by a statement

made by an interview conducted with Manager 1 who notes the importance of actually

solving a problem for the intended user. Lastly, the final question challenges potential

assumptions made when answering the second question. This question was inspired by an

interview with Manager 2, who explained that the first step in evaluating an idea is to

imagine the process would look like if you were to solve the imagined problem for yourself

or a friend. If the answer to this question is no, the first step is to find out who has the

imagined problem. If the answer to all questions in the pre-screening is yes, then the idea

passes the pre-screening and can move on to the next step in the evaluation by applying the

framework.

The second step in applying the framework is to evaluate the selection criteria. These criteria

are presented in the framework illustrated in Figure 14, below. This framework brings up

vital themes and criteria to consider when evaluating an idea for a new product. The end

product is a numerical score, the comparative score, between 5.5 and 82.5 that reflects the

potential of the idea. If several ideas are compared, they can be evaluated using this

framework and then sorted by the comparative score.

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Theme Criteria Importance

(0.5-1.5)

Score (1-5)

Comparative

score

Reach

Potential number of users x =

Potential future users x =

Number of touchpoints x =

User acquisition x =

Impact Customer benefit x =

Competitiveness x =

Confidence Personal experience x =

Probability of success x =

Effort

Possibility to experiment x =

Time and cost to execute x =

Number of stakeholders involved x =

Σ

Figure 14: Framework for Idea Selection

The importance of each criteria should be rated. The value of the weight should be between

0.5 and 1.5 as illustrated in Table 11. The next step is to iterate through each criteria and set a

score from 1 to 5 (low to high) depending on the potential of the idea with regards to that

specific criteria. In other words, the performance of the idea in relation to each criteria

should be evaluated. For example, if the product has a very high number of potential users,

the score for the first criteria, “Potential number of users” should be 5. This method of

scoring 1-5 on criteria is also utilized by Bitman & Sharif (2008) to collect an overall

assessment of the idea. This framework implements a WSM because a recent study by Cui et

al. (2019) suggests that the WSM strictly outperforms the simpler ranking model in terms of

the likelihood of selecting the highest-quality ideas.

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Value of weight Importance of criteria

0.5 Low

1 Medium

1.5 High

Table 11: Weights and importance

The next step in the innovation process is to find the idea with the highest potential by

selecting the one with the highest comparative score. When building a MVP, the assumptions

made when evaluating the idea can be tested. The purpose of the MVP should be to verify the

assumptions made about the Reach, Impact, Confidence and Effort. If this is done, the

Confidence, or the probability of success will increase because the assumptions made will

have a higher likelihood of being true. Testing and analysing a MVP is part of Lean

Development. After this, assumptions and estimates can be adjusted in the framework and a

comparative score with higher accuracy can be calculated. This process is illustrated in

Figure 15 below.

Figure 15: Illustration of the Idea Selection Process

6.2 Applying the Framework for Idea Selection

The framework for Idea Selection has been applied to an idea at Hedvig within travel

insurance. The purpose of this was also to validate the framework in a real-world setting.

6.2.1 Idea Description

One idea from a set of 46 ideas collected at Hedvig was selected for the framework to be

applied to. The idea that was selected relates to automatic travel claims. The idea was

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selected for further analysis because of directions from the management team at Hedvig,

because it was one of the most common ideas suggested and because it is an interesting idea

apply the framework to. The employees who participated in the idea collection survey have

slightly different ways of describing the idea:

Selected answers to question (3): What features would our members be really excited about?

● “SL train delay automatic claims payout/uber call”

● “Automated travel reimbursement from airlines or trains”

Selected answers to question (4): What features are you really excited about?

● “Travel mode”

● “Automatic reimbursement according to EU legislation for delays/cancellations.

Additional services for delays. Maybe we can always give out 100 sek if a flight is

delayed at least 30 minutes, as a nice extra (ex-gratia)”

Together with the employees from the management and product team, a scope for the idea

was defined. The product should enable the user to sign up by email. When the user buys an

airline ticket in for a flight in Europe or a train ticket with SJ, Hedvig detects the transaction.

If the trip is later cancelled or delayed, then the user will automatically receive compensation

through Hedvig. In the back-end, Hedvig will make a formal complaint to the airline/SJ and

re-route the money to the user. Thereby Hedvig can provide a similar service as a claims

management company.

6.2.2 Evaluating the Idea using the Framework

To gather insight on the idea, user interviews were conducted. These interviews have been

used to evaluate the criteria in the framework for Idea Selection. The first step of the

evaluation process is the pre-screening:

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❏ Is the idea consistent with company objectives?

Yes. Hedvig plans to expand into travel insurance in the long term.

❏ Is this product solving a problem?

Yes. User interviews show that several of the interviewees worry about delayed or

cancelled flights and trains. Also, most interviewees do not know how to make a

compensation claim if their flight or train is delayed.

❏ Do I have this problem or do I know anyone that has this problem?

Yes. The problem has been verified by user interviews.

Because the answer to all three questions is yes, the idea passed the pre-screening. The next

step was to use the framework to evaluate the idea. In the figure below (Figure 16), an

illustration of how the framework has been used to evaluate the idea is shown. In the expert

interviews, it was clear that Reach and Impact are especially important to Hedvig in the stage

they are in right now. Therefore, both of these themes have a higher importance on all

criteria. The rest of the criteria have medium importance. Beneath is an illustration (Figure

16) and a following description of how the framework was applied.

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Theme Criteria Importance

(0.5-1.5)

Score (1-5)

Comparative

score

Reach

Potential number of users 1.5 x 5 = 7.5

Potential future users 1.5 x 3 = 4.5

Number of touchpoints 1.5 x 1 = 1.5

User acquisition 1.5 x 5 = 7.5

Impact Customer benefit 1.5 x 5 = 7.5

Competitiveness 1.5 x 3 = 4.5

Confidence Personal experience 1 x 5 = 5

Probability of success 1 x 4 = 4

Effort

Possibility to experiment 1 x 5 = 5

Time and cost to execute 1 x 5 = 5

Number of stakeholders involved 1 x 4 = 4

Σ 56

Figure 16: The Framework for Idea Selection applied to an idea at Hedvig

The final comparative score of the idea is 56. This in and of itself does not provide much

information, but it can be used to compare with other ideas if the same methods are applied.

Reach

Potential Number of Users (Score: 5)

The market for airline compensation is large (AirHelp, 2018) and the user interviews indicate

that many travel at least once a year by airplane. Therefore, the market in Europe (Hedvig’s

long term target market) is very large. This is relevant because both Rochford (1991) and

Ebner et al. (2009) emphasize the criteria of market size and because the empirical findings

support this.

Potential Future Users (Score: 3)

Because of the sharp decline in the number of flights since COVID-19 the number of

cancelled trips and need for compensation might increase. It is unclear how this will affect

the long term travel industry.

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Number of Touchpoints (Score: 1)

Airlines and trains are late relatively rarely, hence the number of touchpoints each year is

very low. The user interviews do not indicate that this is a frequent problem. When asked

how frequently they experience delays with airlines or trains, one user answered:

“I was delayed when travelling with SJ two years ago. The train was delayed 12 hours

and I wanted to get compensation for the ticket price, but I did not get that.” (User 4)

User Acquisition (Score: 5)

This product would be provided to those who are already Hedvig users and the user would

only be charged for the service if they receive compensation. Therefore the user acquisition

will likely come easy.

Impact

Customer Benefit (Score: 5)

Even though this product does not necessarily provide a strong sense of community, it has

high functionality. This product has the possibility to make a relatively significant impact on

the lives of the user because compensation from an delayed or cancelled trip with an airline

can give compensation up to 600 EUR. This product may increase retention because of the

high customer benefit. There is a benefit in having the process fully automatic. One user

states:

“If I know myself I would probably not even try to get compensation for it or I would

wait until I was back home.” (User 3)

Competitiveness (Score: 3)

Companies such as AirHelp have a strong position in the market for airline compensation, but

the user interviewers indicate that not many travellers are familiar with them. Hedvig will

only be able to reach their existing users, but these users would have a good incentive to use

Hedvig when making a claim because this is a brand that the consumer trusts.

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Confidence

Personal experience (Score: 5)

The author of this thesis is responsible for the project and has relatively limited experience

executing similar projects. On the other hand, this project was selected and discussed with the

management team at Hedvig. They have significant experience.

Probability of success (Score: 4)

There is a clear problem to be solved and because it does not require a very complex

technological solution. This supports the assumption of a high probability of success. The

potential partnerships that would need to be formed is unexplored.

Effort

Possibility to experiment (Score: 5)

It is possible to experiment and build a MVP because a very simple version of the product

will likely be able to generate customer benefit. The user interviews indicate that many

travellers turn to their insurance company as one of the first they would contact in case of a

delayed/cancelled flight. Hedvig could test if the same applies to their entire user base by

having a page in the app display information about the rules and possibilities to get

compensation if their flight is delayed. This way, the assumption of user acquisition and

customer benefit could be tested.

Time and cost to execute (Score: 5)

The time to execute the MVP could potentially be very short. It would involve research about

the rules and regulations, copywriting and design. This way, Hedvig could in a first step set

up a landing page with information to investigate the other assumptions of the framework. No

significant costs are involved in doing this.

Number of stakeholders involved (Score: 4)

This project involves stakeholders from marketing, tech and UI. No external stakeholders are

needed to develop the MVP.

59

7. Discussion and Conclusions

The findings outlined in the previous section will be revisited and discussed in relation to the

thesis purpose in the following chapter. This section also presents how well the produced

results answers the stated research questions. Furthermore, limitations and suggestions for

further research in the field will be presented.

7.1 The Framework for Idea Selection

The purpose of this thesis was to explore how startups can make better decisions regarding

Idea Selection, with focus in a Lean Development context by developing a framework for

Idea Selection in a Lean Development context. The framework for Idea Selection is a simple

and efficient method for condensing the key factors from available literature on Idea

Selection and empirical interviews into a guide. The aim of this guide is to shed light on some

of the key challenges startups have in selecting the most promising idea to pursue. The

framework involves evaluation of 11 criteria in a total of four themes: Reach, Impact,

Confidence and Effort. This framework sheds light on the Idea Selection process, something

that has been ignored to some extent in research (Girotra et al., 2010). Furthermore, the

framework has been validated in a real-world setting by applying it to an idea within travel

insurance at Hedvig.

The proposed framework for Idea Selection follows a similar structure as proposed by

Rochford (1991), Ebner et al. (2009) and Bitman & Sharif (2008). The framework consists of

combined criteria for Idea Selection that relates to one of the four themes in the framework.

Furthermore, as Rochford (1991) proposes, a pre-screening method has been used. By doing

this, many ideas can be filtered out at a very low cost and the ideas that pass the pre-screen

will be subjected to the more rigorous next parts of the screening process. Furthermore,

implementing the framework is an MCDM-problem. To solve this, the WSM has been used.

Poh et al. (2001) find that the WSM is one of the best methods of evaluation with regards to

three categories: simplicity, availability of data needed and adaptivity. This is of essence

because the quality of the result is not only dependent on the project itself, but also on the

method of evaluation (Poh et al., 2001).

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The framework incorporates the process of validated learning by involving the concept of a

MVP (Batova et al., 2016). Lean Development involves agile development which in part

means being able to respond to changes over following a plan. The NPPD contains

unpredictability and chances are, plans are going to change. Ries (2013) describes Lean as an

iterative process with three stages: build, measure and learn. The main purpose of the

framework for Idea Selection is to be used to decide what to build. Another purpose of the

framework is also to follow up on the MVP that was built. The framework gives a structured

method of keeping track of what assumptions were made as well as measuring how the MVP

performs in regards to several criteria.

7.2 Answering the Research Questions

This thesis aims to answer the main research question:

MRQ: How can the Idea Selection process in an early-stage startup be conducted in a Lean

Development context?

To answer this question, the Framework for Idea Selection has been developed. The

framework has been derived from theoretical material on Idea Selection and Lean

Development as well as an empirical case study at Hedvig. By considering Ideas from the

lens of the four themes: Reach, Impact, Confidence and Effort - the startup can select the

most promising ideas to pursue by calculating a comparative score for each idea. The

comparative score is calculated by evaluating 11 different criteria. The idea with the highest

comparative score should be the most promising idea to pursue. The framework is a

structured method for Idea Selection that can be utilized within startups.

A supporting research question has been defined to help answering the main research

question:

SQ: What implications does Lean Development have on the Idea Selection process at an

early-stage startup?

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Lean Development affects the NPPD in a startup mainly by introducing the concept of

MVP’s. A MVP can be built to test and verify assumptions about the product. In NPPD, there

are many factors that determine if a product will be a success, therefore it is impossible to

predict if a product will be a success. Instead of trying to make the impossible possible by

conducting overly rigorous product evaluations, a MVP can be used. The Framework for Idea

Selection incorporates the concept of a MVP in the Effort theme. Instead of considering the

effort it would take to completely finish the imagined product, the effort of developing a

MVP can be considered. Furthermore, the framework incorporates the concept of Validated

Learning in the Idea Selection process by including an iterative approach to validating

hypotheses and assumptions made in the Idea Selection process.

7.3 Limitations

Based on the scope and the timeframe of the study, there are some limitations that need to be

accounted for as presented in the introduction. First of all, the results of this study are based

on research conducted within one startup. Also, this report excludes the commercialization

part of the innovation process.

The thesis was conducted in a corporation with one startup (Hedvig). Therefore, the results

could benefit from making more studies at other startups with different prerequisites.

However, given the scope and the timeframe of study, interviewing one startup in detail was

enough to answer the research question. First of all, Hedvig is based in Stockholm. This city

has one of the strongest innovation environments in Europe. It is possible that Stockholm

poses an environment that, to a larger extent compared to other cities, allows for more

innovation. Secondly, Hedvig has raised a significant amount of capital from high profile

investors. This allows Hedvig to make big bets on innovation and may therefore skew their

view compared to other startups that have not raised a significant amount of capital. Lastly,

Hedvig has built a strong brand name, as well as a strong employer brand, which allows

Hedvig to recruit top talent. This in turn may affect the innovation in the company.

The innovation process consists of three steps: FEI, NPPD and Commercialization (Koen et

al., 2001). The part of Commercialization is not included in the scope of this thesis. This

means that any long-term financial consequences of the idea are not considered. Some of the

62

most common methods of evaluating projects is to utilize tools from corporate finance such

as payback period, internal rate of return or net present value. For innovative projects and

new products in startups, using these tools is of little value in the early stage. The framework

for Idea Selection presented in this thesis operates on the premise that if something that a lot

of people want or need is built, there will likely be a financial opportunity as well.

7.4 Managerial Implications

The framework presented in this study can be used by startups in the Idea Screening process.

The framework is developed to be simple and can be understood by people from many

different departments. The purpose of the approach developed by Amazon called the

“PR/FAQ” is to tackle the problem of selecting the best ideas. This approach is implemented

as a tool used by any employee with a new idea. The “PR/FAQ” is a six-page document

consisting of a press release and an FAQ relating to the imagined finished product (Denning,

2019). The framework for Idea Selection can be used in a similar way.

7.5 Suggestions for Future Research

The importance of the FEI in the innovation process has been emphasized by several authors

(Cooper, 1988; Kim & Wilemon, 2002). There are three areas of interest for future research:

(1) Do the results extend to other startups?

(2) Develop a method for how to decide the weights in the framework

(3) How is the framework affected if the basic assumptions of Lean Development are

challenged?

As previously mentioned, the results from this study could benefit from making more studies

at other startups with different prerequisites. It would be interesting to understand to what

degree the results from this study are generalizable to other startups. Another area of interest

for future research relates to how to decide on the weights in the framework. One suggestion

is to use a method such as AHP and it would be interesting to analyse how this would be

done and to verify the findings of Poh et al. (2001) who argues that this is one of the best

methods to solve MCDA problems.

63

Lastly, one of the main assumptions of Lean Development is that the purpose is customer

development, i.e. developing products that the customer wants. In some cases, customer

development may not be what motivates a startup to develop new products, it can for

example be media attention or to attract investors. The premise of the results of this study are

based on the assumption that the purpose of NPPD is customer development. It would be

interesting to investigate how the framework presented in this study holds true when this is

not the case. For example, many startups are dependent on external financing. The empirical

findings indicate that there may be other reasons than customer development for NPPD. One

of these reasons can be to raise funds. Therefore, it is important to consider how a new

product will affect the relation with financiers. If the premise of NPPD is to attract new

investors, it would be interesting to investigate what parts of the framework presented in this

study holds true.

64

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Appendix 1

Insurance Industry, Source: Hedvig

i

Appendix 2

Founding date of Insurance companies

Company Year founded

Folksam 1908

If (Skandia) 1855

Trygg-Hansa (Städernas allmänna brandstodsbolag)

1828

Länsförsäkringar 1801

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Appendix 3

Compensation scheme for flights within EU

Length of delay Journey distance Compensation

>3 hours

< 1 500 km €250

> 1 500 km (within EU) €400

1 500 - 3 500 km (all EU departing flights)

€400

3-4 hours > 3 500 km (from an EU country to a non-EU country)

€400

>4 hours > 3 500 km (from an EU country to a non-EU country)

€600

>5 hours Any flight departing from EU €600

iii

Appendix 4

iv

Appendix 5

v

Appendix 6

About the person, their role and Hedvig -Please describe your role as XX -...biggest challenges in your role? -Tell me about Hedvig -How did Hedvig start?

-Technical challenges? -Partnerships?

-Greatest challenges for Hedvig in the coming years? Ideation and Idea Selection -How do Hedvig find new ideas? -How do you choose which ideas to pursue? -How do you choose what to work on? -Is Hedvig an innovative environment? Tell me more? -Is there a formal way to assess new projects? What do you think when you hear a suggestion for a new product or feature? -How do you reach growth? Most important parameters? -[Explain ROI perspective] How do you think about effort? How do you think around impact? -[Automatic travel claims] What do you think about it? -[Automatic travel claims] What do you think when you hear a suggestion for a new product or feature? -[Automatic travel claims] How do you think about effort? How do you think around impact? Product development process -What do you do if you hear a great idea in your role as XX? -What are the steps between idea and launch? -What is an MVP? Tell me more? -What is a prototype? Tell me more? -Why is user feedback important? -How do you incorporate user feedback?

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Appendix 7 Purpose What’s the purpose of the interviews?

● Find out about the interest and market for the idea of mitigating worries related to long distance travel and a system that automatically makes a claim if the plane is delayed/cancelled

What do we want to learn? ● Do people feel insecure about travelling? ● What do people worry about when travelling? ● Do people know about and use services like AirHelp? ● Would users like an AirHelp-like service integrated into Hedvig? ● Do people care about making faster claims? Automatic claims? The estimated value?

Any hypothesis that you’re looking to validate or falsify?

● We believe people want to feel more safe regarding travel, especially when it comes to the travel by airline and train

● We believe people want help making claims to airlines/SJ ● We believe people think it's cumbersome to report delayed travels

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