Hot or Not? The Pros and Cons When Corporates Imitate Start-Up Culture

Dries Faems / Anna Brattström - 2. Juli 2024

Tips for practitioners

The popcorn machine is popping away. Foosball tables and beanbag chairs take up the majority of the office’s open floorplan. The person in charge of development comes to work clad in jogging pants and a hoodie. Her title is the “Head of Future.” In many ways—from the dress code to the way employees talk and dress—corporate venturing units (e.g., innovation labs or accelerators) are often reminiscent of the innovative start-ups in which they invest. And they are responsible for providing new business ideas and guaranteeing that their parent company is able to react quickly to any current challenges.

But how does giving Lego sets to its employees help the company further its goals?

A team of researchers, including those from WHU – Otto Beisheim School of Management, were wondering just that. They wanted to know what effect theatrical cultural design, also known as “innovation theater,” has on a company’s resilience and success.

“We have concluded that innovation theater can be just as beneficial as it can be destructive to corporate venturing units. It all depends on how it is implemented,” says  Professor Dries Faems of WHU’s Chair of Entrepreneurship, Innovation, and Technological Transformation. He notes that cultural design fulfills three different functions.

Convincing investors—the attention-directing function

The first of these is the “attention-directing” function. As many of these units are still in their infancy, there is often a lack of business experience and reputation in their respective industries. And because of this, they cannot always make the argument they need to convince stakeholders of their business ideas. “A bespoke form of theatrical cultural design, particularly during the early stages, can go a long way toward averting the stakeholders’ attention away from a current lack of results and keeping them focused on the strong sense of commitment on the part of top management or the unit’s potential to add value in the future,” said Professor Faems. For example, employees may adopt an internal language that is focused on the future and tolerant of failure, making use of specific terms, such as “acceleration” or “fail-fast.” This can lead to stakeholders also assuming a similar focus on future success and the unit’s own potential.

The social categorization function

Next, there is the “social categorization” function. A corporate venturing unit can craft its own unique identity upon the very characteristics that make it stand out, i.e., by emphasizing certain norms and values, such as a specific dress code or the ways its employees behave. Its strategic and distinct features help establish legitimacy—and show potential investors an alternative path to economic success.

However, there is a risk that the pendulum could swing the other way. This occurs when the company’s unique cultural design leads to an “us vs. them” mentality among colleagues.

The escapist function

Cultural design also fulfills an “escapist” function. People find refuge from their everyday problems, for example, at the movies, at the gym, or maybe at football games. That time-out gives them the energy they need to be creative and get their work done. Cultural design can be a similar source of inspiration for employees at corporate venturing units, one that offers a chance to experience something wholly outside of their everyday work-life. This could take the form of a specific aesthetic used at the office. Or even just a place to relax that features inspirational quotes or pieces of art.

Cultural design also fulfills a symbolic function. Similar to the effect a Broadway show has on its audience, a unique facility gives employees the sensation of entering a different world where they can experience something new. Some spaces may have literal stages of their own, even just a podium, which are befitting of the standard practices at a corporate venturing unit. It’s where employees present their ideas and tend to be more extroverted in their behavior.

“In the end, theatrical cultural design can lead to corporate venturing units being regarded as a chance to escape normal working life,” notes Professor Faems. But it’s not impossible for these units to be regarded as superficial and inauthentic. This results in a complete lack of cultural acceptance on the part of the stakeholders, placing the legitimacy of the entire unit in jeopardy.

The dual nature of cultural design

The study reveals that cultural design, whether in its neutral, legitimizing, or delegitimizing function, plays a role in corporate venturing units. “And these results also show us how much potential cultural design has—when implemented properly and to scale,” says Professor Faems.

Experts should therefore carefully control any cultural design in their corporate venturing unit before implementing it. This is the only way to ensure that the design in question won’t weaken the unit, which is exactly what will happen if the final product feels phony.

Literature reference

- Brattström, A./Faems, D. (2024) Innovation theater in corporate venturing units: Cultural design as a (de)legitimizing mechanism. Journal of Product Innovation Management https://doi-org.proxy-ub.rug.nl/10.1111/jpim.12736.