The great science fiction writer William Gibson famously noted that “the future is already here; it’s just not widely distributed yet.” I think that I’ve seen the future, and in it, everything will be “Pelotonized.”
Let me explain.
For those of you who haven’t jumped on the hottest at-home fitness trend of this pandemic-cursed year, Peloton is a high-tech stationary bike with a 24” touchscreen TV bolted onto it. The monitor allows the rider to access content – both live and on-demand video workouts – where an instructor teaches in much the same they would in a spin studio. Peloton now offers everything from Yoga to HIIT workouts and has even branched out to other hardware (the Tread +, which allows you to do interactive running classes).
The company was born as a way to eliminate a pain point – specifically, according to co-Founder John Foley, to resolve the challenge of securing a reservation for a bike in his favorite spin classes. The limited amount of seats always sold out before he could get around to booking, and that prompted him to wonder if there was a way to replicate the in-studio experience at home.
Peloton initially did what most first-generation technologies do: it tried to simulate what happened in the real world with an almost-as-good version that was more convenient. We see this evolution happen all of the time: the first successful e-mail service, AOL carried over ponderous anachronisms from “snail mail” like mailboxes and envelopes iconography. But later, technologies like IM and Slack took full advantage of the asynchronous nature of electronic communication to move messaging forward.
This is where Peloton in 2020 comes in. With its combination of hardware, software, content, data capture, and community, the company has managed to enhance the spin session beyond the IRL (in real life) studio version it originally emulated. Put another way, Peloton has pioneered a hybrid experience blending the best of online and offline features to create what I call a “four-dimensional” service.
Today, a Peloton spin class at home is a richer, more complete experience than doing one in a studio. This seamless marriage of the virtual and the physical will be woven into the fabric of every successful offering going forward. Soon, everything will be “Pelotonized.”
All propositions have to be Four-Dimensional now
Our expectations are being reset in real-time due to the changes wrought by COVID-19. While many people pine for a return to 2019, the reality is that we won’t ever go back. Some of the behavioral changes triggered by the pandemic will become permanent. We all dream of meeting up in real life, but we have also gotten a good look at the virtues of virtuality.
As a result, companies will have to design and deliver their products and services in four dimensions from now on – the fourth being the virtual one that is both enabled by technology and, when carefully designed and well-executed, enhanced by it.
I’m not talking about merely bolting on a digital offering to an already existing physical experience, either. The fourth dimension not only has to make sense; it also has to be additive. Peloton has accomplished this by using its bike and content combination to remove a major annoyance but has also added key features that you can’t access in-studio.
First, they’ve doubled down on personalization. You can filter workouts based on type, intensity, and length. You can also customize classes based on musical genre or favorite band. From The Weeknd to the Red Hot Chili Peppers, there are over 65 artist-themed classes to choose from and even special collaborations (Beyonce x Peloton) that borrow from sneakerhead culture. Hear a song you love while sweating one out? You can save the track from class straight to your Spotify playlist. Your local spin class can’t do that.
Second, they have invested heavily into nurturing a sense of community. From tags (#WorkingMomsofPeloton) to video chats (where you can have a screen-within-screen of your college roommate to race against), it has made it easy to find your tribe. Contrast that with the strangely misanthropic experience you get at an Equinox spin class, where even regulars don’t often say hello to each other, and you can see why provocative business school professor Scott Galloway has only half-jokingly recommended that Peloton add a dating component to its offering.
Finally, Peloton offers other digital-enabled enrichments like data analytics (think your Fitbit or Apple Watch stats) and gamification (leaderboards and personal bests) that will soon become integral elements of every customer experience. They’ve spawned a whole new category of connected at-home fitness that now includes boxing (Fight Camp), magic mirrors (Tonal), an AI-Powered Interactive Fitness/Yoga Mat (YogiFi), and even indoor climbing (CLIMBR).
Peloton is the future, just not widely distributed … yet. Whereas most companies competed on exclusively physical aspects of their offering, going forward they are going to have to leverage the virtual intelligently as well – what technology consultancy Cognizant calls building “code halos” around every product or service. Increasingly, experiences will feel “flat” if they don’t have four-dimensionality.
Companies will have to go hybrid to succeed as well
We’re seeing the signs of this already. Warner Brothers had to premiere “WW84” on both HBO Max and theaters for it to reach its intended audience. My local gym was forced to reverse-engineer what Peloton has done, selling connected bikes and developing a fitness app to provide out-of-studio workout content. Digital native brands like Amazon and Warby Parker have moved from online to actual stores, whereas physical retail giants like Target and Walmart have beefed up their online infrastructure (click and collect or showroom in-store and delivery at home) as well as the apps (Walmart Pay) that further blur the distinction between the virtual and IRL.
Companies that began offline will move more of their proposition online, and vice versa. Analog experiences have to be enhanced by digital overlays to achieve that elusive chocolate and peanut butter combination that we will all soon crave.
These companies are taking another page from Peloton in that their business models are hybrid as well. The logic powering Peloton’s rise in market capitalization is not just because it’s a “story stock” but also because it has two separate revenue streams. It makes some money on the hardware; however, they make most of their profit on the recurring revenue stream of the $49/month subscription to the content that is needed to enjoy the bike. This is another area that is changing rapidly as well.
Customers have to be hybrid to get the most of many products
Do you want to try Apple Fitness +? You can download the app on your iPhone, of course. But the experience is enhanced when paired with an Apple Watch. Similarly, Peloton’s fitness app can be used without the bike (and you could buy the bike and forego the content), but they are designed to be used together. Customers are being nudged – forced? – to buy into the hybrid offering by purchasing the hardware and software.
This trend is just getting started. Just as “social distancing” was one of the words of 2020, I suspect that “hybrid” will be on everyone’s lips through 2021 and beyond. In addition to products, services, and experiences becoming hybrid, and companies employing dual business models, organizations will have to offer hybrid working models where one can go to an office – either HQ or a WeWork – but also allow for fully remote participation as well. The cover of a recent Harvard Business Review piece codified this change by noting that we’ve quickly shifted from allowing a WFH (work from home) employee to embracing a WFA (work from anywhere) future. Zoom’s new tagline is “Enabling the Everywhere Workforce”.
For almost every aspect of life, therefore, it’s not “or” but “and” that’s going to be our expectation from now on.
This is happening in almost every sector. Think about another stock market darling of 2020 – Tesla. Aside from its seductive design, ecological appeal, and tempting auto-drive feature, it has transcended another anachronism that has saddled every car in history before they came along: instant depreciation. Most cars are worth one-third less the minute you drive them off the lot because they are no longer “new” and get rapidly obsolete over time. But with over the air (OTA) software updates, a Tesla improves as it “ages”.
A forward-thinking retailer like Restoration Hardware will bridge its online and real-world sales strategies with an app that allows a potential buyer to see how a couch on display in a showroom might look in their living room. In residential real estate, you can envisage staging a house where you have different themes and templates depending on the couple -or single guy – looking at the property.
In my own field, I’m working alongside some very smart people to develop a curated space and platform for meaningful virtual engagement. We’ve designed a process that can actually improve on real-life meetings rather than be just a substitute for them. Properly curated online conversations are more democratic, less homogeneous, more conducive to open dialogue – but also leverage a slew of new tools that allow us to take an X-Ray into the mind of the crowd that is simply not possible in an offline setting. Our vision is to combine high tech and human touch to create a space that accomplishes what neither real nor online rooms can do on their own: catalyze the conversations that aren’t happening but should be.
This is just the beginning. Imagine how the hybrid experience will be enhanced once technologies like AR (augmented reality) and VR (virtual reality) are fine-tuned? The first phase of this revolution has been to add a digital dimension to IRL activities. The next phase will be to add three dimensions to digital-origin products (video games) into HoloDeck-type experiences.
Just as the hot VC phrase of the past decade was “Uber for X”, I predict that post-pandemic it will be “the Peloton of Y”.
Hybrid offerings allow companies to harness the benefits of big data insights, gamification, community, and personalization to augment customer experiences. The new mantra will be physical and digital, not either/or.
Not only will consumers crave them, but shareholders will also demand them. The robustness and diversification of hybrid business models are incredibly appealing in their own right. They also create strategic moats. Hardware drives one-off or cyclical sales, but software unlocks recurring revenue streams and lock-in. People are reluctant to give up the data they poured into their Pelotons and Fitbits as the data is not yet portable. These are the new switching costs.
This is the next phase in the “software is eating the world” phenomenon. So many industries have been disrupted by new players (Uber, Airbnb, Netflix) whose comparative advantage was about the effective deployment of digital technology. Going forward, it will be more about the integration of digital and physical services in a way that privileges choice, customization, and convenience to create enhanced experiences. The skillful combination of the best parts into four-dimensional offerings will determine tomorrow’s winners and losers.
I believe the future is already here. Are you ready to Pelotonize your product?