Walgreens

Walgreens' partnership with Theranos reveals how visual credibility signals can override due diligence - with catastrophic consequences. In 2013, the major US pharmacy chain deployed 40 'wellness centers' featuring Theranos blood testing kiosks in stores across Arizona and California despite unproven technology. The deployment provided Theranos with invaluable visual validation: seeing devices in Walgreens pharmacies suggested major retailer endorsement of the technology.

Walgreens' due diligence was minimal. The company trusted visual signals - impressive board (Kissinger, Shultz), charismatic founder in black turtlenecks, sleek product design - rather than demanding proof of technical capability. This is costly signaling in reverse: Walgreens lent its credibility without verifying that Theranos had earned it through actual capability. When Theranos' fraud was exposed, Walgreens faced lawsuits and lost hundreds of millions.

The lesson: visual signals work because they're usually costly to fake - but sophisticated frauds exploit exactly this trust. In high-stakes partnerships, verify that impressive signals are backed by actual capability. Walgreens learned that lending your credibility to unverified signals doesn't just risk capital - it risks the trust that makes your brand valuable.