I openly and transparently admit that Peloton has changed my life and I am addicted to the entire user
experience. I think it’s one of the most innovative, unique, and powerful inventions ever. As I think about the innovations in my world, I know I can’t live without my Dell Alienware computer, my Apple iPhone, and my Peloton cycle.
But unlike Apple which as of this writing had a $2.7 trillion market cap, Peloton seems to be in some financial trouble. A little over a year ago, the stock was the darling of Wall Street and hit a high of $163 per share. Today it hit a low of $24.22.
So, what happened?
As a talent development professional who teaches Business Acumen skills, here are 3 things that we teach in our business acumen programs to help participants learn the concepts so they can make the best business decisions back on the job.
The Value Proposition
The first step of a business acumen analysis is to understand the value proposition to customers. In the case of Peloton, they are offering a word-class virtual workout experience that is supported by a network of dedicated customers cheering each other on, great instructors who are able to form emotional connections with their dedicated riders, and technology to make your ride, run, or total body workout the best it can be. Their published vision statement is:
To pull everyone up and empower their lives with world-class fitness equipment and experts.
In other words, they have brought top expert fitness into people’s homes using a digital platform.
Advantexe Instant Business Acumen Analysis
While the value proposition is great and the technology is great, there is a significant flaw: Peloton is struggling with identifying its target customer. As of today, they only have 2.7 million subscribers. Out of all the people on the planet who could use a nice workout, that is not a successful number. It seems that the target audiences have fluctuated - from stay-at-home parents to anyone working remotely during the pandemic. There are no clear-cut customer segments that are prioritized and messaged to. It seems all over the place and that is a real shame.
Operations Decisions
The second step of a business acumen analysis is to understand what they are doing in terms of operating decisions. Operating decisions are things like how they are selling, pricing, marketing, R&D, supply chain, manufacturing, finance, and human resources.
Advantexe Instant Business Acumen Analysis
While the price is high relative to the alternatives, and there is a $40 subscription fee, overall, it is still a great value if you use it as their raving customers do. The instructors like Cody, Sam, and Leeann become part of your everyday lives and family.
In our opinion, the problem here is Marketing. It has become Peloton’s fatal flaw. Partly because it’s not focused on the best target segments but because whenever they have tried something bold it has failed miserably. Two recent examples:
- The fiasco about the commercial where the “man of the family” buys his wife a Peloton so she can get “back in shape” was widely panned by just about everyone as being socially deaf.
- The recent fiasco where “Big,” the character from “Just Like That” (the Sex and the City reboot) has a heart attack and dies while on a cycling “date” (they implied he was “cheating on his wife”) with one of the Peloton instructors. Not only did the character die on a Peloton, the actor, Chris Noth was then accused of sexual harassment by multiple women after he made a Peloton commercial trying to convince us that we weren’t going to have heart attacks during a workout. A total disaster.
Financial Analysis
The third part of a business acumen analysis is to look at the key financials. For Peloton, they are painfully obvious (all data below is from the last published reports of Q3 2021.
- Net income is negative $376 million (from the Income Statement)
- Inventories are up to $1.2 billion which means they made a lot of treadmills and bikes they thought they were going to sell but didn’t (from the Balance Sheet)
- The net change in cash was negative $552 million (from the Cash Flow Report)
Advantexe Instant Business Acumen Analysis
There is nothing good here from a financial perspective. The biggest issue is the inventory. When your inventory is too high and your cash flow is down, that means you thought you would sell more units than you did. And the reason you didn’t sell more units was that your Marketing is not working. It’s probably time for a new Marketing team and agency to focus on who is the target customers, what is the right message, how do you deliver the message, and how do you create a call to action to get the targeted customers to want to buy the product.
Summary
In summary, Business Acumen skills can be and should be used for analysis and understanding of any business situation. As seen from this application to Peloton, you can assess a situation and make a logical and informed decision on changing the direction of the business.
