What could we learn from the struggles of Peloton (the company) in higher education?
Before we dive in, the usual caveats of this kind of lateral thinking about science apply:
- Higher education is different from other industries, and schools are not like corporations.
- Higher education is a public good rather than a consumer good.
- Higher education is highly regulated and largely (although decreasingly) publicly funded.
Any lessons we can learn from Peloton are likely to have more entertainment than practical value. But that shouldn’t stop us from trying.
Peloton’s headlines are that it’s a company that has thrived during the pandemic, only to see its fortunes dwindle in recent months.
This overall history says nothing about the quality of the training experience on a Peloton bike (or treadmill). Many of my closest friends and colleagues own a Peloton and they love the classes and swear by the entire experience. (My household considered a peloton, but chose to stick with our Les Mills streaming workouts.)
The Peloton story we look at with higher eyes is that of the company’s recent challenges. These challenges are best illustrated in the company’s share price, which peaked in July 2021 at $130 per share and is currently trading at $22. While the company was valued at over $47 billion last summer, the company today has a market cap of under $10 billion.
The precipitous decline in Peloton’s stock has fueled speculation that the company could be acquired. Apple and Amazon are sometimes mentioned as potential buyers. We will see.
From an academic perspective, there are some fascinating parallels between Peloton and the fastest growing aspect of the post-secondary sector – online education.
Assuming that in higher education we want to avoid our universities suffering a fate similar to Peloton’s (layoffs, leadership changes, etc.), what can we learn from the company?
We need to separate the experience of owning and using a Peloton (which everyone – at least my friends – seem to agree is fantastic) from the experience of owning Peloton stock. (Not so great if you bought it for $130 a share.)
Peloton didn’t get into trouble for offering a poor product/service combination. This integration is fantastic. Peloton (or its investors) appear to have made a mistake in assuming growth would continue indefinitely.
What should have been obvious in hindsight was that the massive surge in demand Peloton experienced was a result of the pandemic and not the result of longer-term and more enduring trends. At some point in the last two years, most households with the desire and disposable income to buy a $1,500-$2,500 Peloton bike have done so.
At the same time, it should have been clear that some fitness enthusiasts would want to return to their local gyms once the pandemic has subsided.
Thinking that a $47 billion peloton makes sense is like thinking that everyone who switched to distance learning in 2020 and 2021 will stay online indefinitely.
To think that Peloton’s $130-per-share price could keep climbing is like believing that distance learning and online learning are the same thing.
Proponents of online learning should keep in mind that future growth will be gradual.
In the future, we’re likely to see the supply of online programs grow faster (as more schools get into the game) than the demand for online learning. Colleges and universities fight for every online enrollment. Online programming competition, already fierce, is only getting more intense.
Like Peloton, we in higher education shouldn’t assume that providing a great online learning experience (similar to Peloton’s superior home practice experience) is enough to fuel never-ending growth.
Many students will prefer to study on campus and in a physical classroom. Face-to-face learning is not going away. We need to look at online education as a complement to brick-and-mortar learning, not a replacement.
The growth of online education will ultimately come from the combination of advances in both qualities and Costs. The fastest growth in online degrees will be in low-cost, scaled programs.
Peloton hasn’t been able to figure out how to bring the cost of their bikes down to a level that creates demand outside of wealthy and die-hard athletes. Colleges and universities need to figure out how to offer quality and affordable online degree programs if they hope to significantly increase demand for higher education.
To me, the ultimate lesson from Peloton is to err on the side of underpromising and delivering. Peloton would have been fine if the company had a clearer view of the short-term reasons for its sudden popularity and likely business realities once the pandemic has passed.
Those of us in the world of online learning should be very cautious in our predictions about the future and reluctant to suggest that rapid and sustained growth will be inevitable.
What do you think some higher ed lessons from Peloton could be?