This article explores innovation initiatives in rural communities in Iceland conveyed through the implementation and perceived outcomes of the hackathon Hacking Hekla. Digitalisation is often proposed as a new, all‐purpose tool for regional development that responds to rural challenges innovatively. However, the digital role is often less clear when examining finer development practices. Hackathons are frequently applied to achieve instant economic and societal change. Through the example of Hacking Hekla, we research the challenges and outcomes of creative interventions and critically explore the value of innovation and digitalisation in the context of rural development in Iceland. Based on action research, we use the hackathon as a tool for knowledge generation and intervention in regional policy discourse with the intention to foster applied digital innovation. Data were collected using qualitative semi‐structured interviews. The study demonstrates a gap between regional policies emphasising digital innovation and innovation practices on the ground and argues that fostering digital innovation in rural communities is a complex process that could demonstrate effects only in the long term.