Fake It ‘Till You Make It?: The Innovation Theater

Innovation is a top priority for companies today: activities such as workshops, innovation programs, labs, or corporate accelerators are increasingly carried out as part of their innovation process. However, these innovation-related activities do not always result in making organizations more innovative.

Such was the case of Theranos, a health technology company founded in 2003 by 19-year-old Elizabeth Holmes. Theranos claimed the development of an innovative device to run blood tests more accurately. With this promise, the company raised more than US$700 million. These claims were later proven to be false. In September 2021, Elizabeth Holmes attended the criminal trial to defend against an indictment of fraud.

This case invokes the term ‘hype’ in reference to overinflated public interest toward a particular technology. This overinflation can be exacerbated by theatrical actions such as narratives, symbols, stories, awards, etc., to gain legitimacy. For example, Holmes was named one of Time’s magazine’s “Time 100 most influential people”, she partnered with influential figures such as Carlos Slim and created a fashionable lab where the ex-vice president Joe Biden was invited for a tour. This case reflects the importance of technological innovation in firms, and at the same time, the negative effects of hype to theatricalize only to gain legitimacy and not to innovate.

Sometimes, organizations pretend to be innovative. The phenomenon of using superficial and trendy activities that have no impact on the innovation process, resulting in futile attempts at innovation is known as ‘innovation theatre’. To investigate how and why innovation theater occurs, we conducted a study using an inductive approach and the theoretical lenses of symbolic actions. The paper “Is it substantive or just symbolic? Understanding innovation theater in organizations: The case of technology-based innovation” (Technovation, 2023), sheds light on the reasons behind the innovation theater.

Based on qualitative and secondary data, we found that organizations attempt to respond to pressure to innovate by only engaging in symbolic activities, which have no bearing on the innovation process but act as mechanisms of legitimation. For example, adopting innovation methods (e.g. contests, lean startup), accelerator programs, trendy technologies (e.g. machine learning, 3D printing), and spending millions advertising such activities with great fanfare may establish a reputation for being an innovative company. However, the extent to which such activities influence the innovation process to deliver deployable new products is unclear.

We found that this occurs as a result of the organization’s hard drivers (e.g. absence of strategy, resources, and capabilities) and soft drivers (e.g. lack of an innovative culture). Accordingly, we propose a model theorizing this phenomenon and a framework for classifying symbolic vs. substantive actions.

Symbolic actions and legitimacy

To acquire resources, technological new ventures need to be perceived as legitimate. One of the primary purposes of symbolic action is to acquire and maintain this legitimacy, especially in new ventures through narratives, stories, memberships, and identity claims. Studies have discovered that when companies attempt to implement new technologies, workers engage in symbolic actions to maintain their status quo and gain legitimacy.

Symbolic actions are highly visible, so they can be communicated easily internally or externally for legitimacy. We found two types of actions:

1. Symbolic hybrid activities such as:
   1. Activities to make a show: Firms frequently organize innovation contests (e.g. bootcamps, hackathons, and innovative weeks), workshops, visits to leading technology companies, or events with great speakers, that are characterized by being colorful, and euphoric, to be visible for internal and external stakeholders. But nothing happens after that. The goal is to communicate these colorful events rather than use them as inputs to develop technology-based products.
   2. Communication: Our data indicate that innovation-related terms are used indiscriminately in internal and external corporate communication. We found that organizations theatricalize innovation by altering their language or making ambiguous promises. This includes the use of the terms ‘technological innovation’, ‘disruptive’, ‘radical technologies’, or related buzzwords in annual reports (e.g. industry 4.0 or digital transformation), media releases, conferences, or roundtables. Although these symbolic activities have no effect on the innovation process, they may influence the position’s brand.
   3. External alliances: Our data revealed alliances with external actors (e.g. tech startups, R&D centers) that had no real intent to innovate, but rather to improve the corporate image or join a fashionable conversation. This kind of external alliance includes deals with startups, incubators, collaborative research projects, or hiring consultants.
2. Symbolic internal activities such as:
   1. Innovation spaces: Corporations have placed spaces with the intent of promoting innovation through the transmission of merely symbolic messages (e.g. innovation rooms, innovation labs). These spaces often have unusual equipment, inspirational phrases, playgrounds, etc.
   2. Internal structures: Another corporate practice entails the establishment of innovation departments, technology offices, internal incubators, intrapreneurship programs, or technological innovation teams, for which neither clear objectives nor a budget has been established. They only communicate that the company is engaged in innovative endeavors.
   3. Sexy management: We have observed that companies frequently invent simple managerial activities to make them appear more appealing or employ trendy technologies and practices.

These ‘theatrical’ activities are easy to communicate or legitimize the work of leaders, organizations, or collaborators, but they have no effect on the process of creating novel technology-based products.

Why does innovation theater occur?

There are different drivers that explain why organizations engage in hybrid/internal symbolic activities:

1. Soft organizational drivers, such as:
   1. Culture: Theater looks well in organizations where the culture discourages experimentation and failure. According to our data, this culture does not encourage collaborators to pursue ideas that impact the innovation process. As a result, all innovation activities resulted in cosmetic actions.
   2. Talent: Our participant observations indicate that demonstrating a company’s innovation activities helps to draw and keep the best talent. It appears that this notion encourages businesses to use innovation activities for purposes other than creating new technology-based solutions.
2. Hard organizational drivers, such as:
   1. Innovation strategy: According to our data, the lack of a vision, objectives, and KPIs are the reasons why innovation activities remain symbolic.
   2. Resources and internal capabilities: Our data revealed that symbolic activities did not result in tangible novel technologies because there was no budget, processes, or structures to support projects, time set aside for innovation, or individuals responsible for advancing ideas.
   3. Innovation as a novel discipline: Because of the uncertainty and lack of knowledge, there is a lot of room for superficial actions or simply copying and pasting what other companies are doing.
3. Legitimacy divers, such as:
   1. Organizational reputation: Our data point to the need to project an optimistic and forward-thinking image that is responsive to current global challenges and technological reputation. This drive to innovate or adapt to trends stems from both internal and external pressures.
   2. Individual positioning: Employees also need to legitimize their work because they want to be seen at the forefront of the use and implementation of new technologies.
   3. Leadership: Top managers deploy symbolic activities (particularly external alliances, internal structures, and communication) that send messages related to innovation but do not address innovation in a substantive way.

Despite diverse efforts, companies often cannot achieve their goals in creating novel products, and innovation theater is one of the reasons. Our paper suggests that there are many activities that do not influence the innovation process but lead to a waste of resources. This does not mean that they are useless, as they contribute to the innovation theater and the need to make up the firm’s reputation.

To sum up, innovation theater occurs when companies respond to external pressures by deploying a variety of symbolic actions that have no effect on any stage of the innovation process. This is due to a combination of hard, soft, and legitimacy drivers. With this research, we call attention to avoiding theater and switching from only symbolic actions to impactful ones.

The authors are research professors at EGADE Business School.