Tesla is laying off workers as electric vehicle sales slow to a crawl. Peloton, the “connected fitness” company that rocketed to stardom during the Pandemic, is jettisoning its CEO and undergoing another round of job cuts as sales lag. Meanwhile, at Nike, firings will continue as growth sputters and the consumer-direct business model has proved a disappointment.
What’s going on here? If market leaders like Tesla, Peloton, and Nike are having trouble adapting, what’s the message for other firms?
What these and other innovators have in common is a failure to adapt to changing market dynamics. Nike was looking ahead when the company decided to build out its e-commerce business. However, they alienated their distribution channels when they withdrew from certain brick-and-mortar retailers before the new consumer direct model proved a hit with consumers. It turns out not all customers were comfortable buying sneakers online.
In 2012, Peloton founder John Foley saw an opportunity that upended the exercise market. As I wrote in Forbes, Foley’s curiosity was initially aroused when he noticed how many stationary bikes were unused in basements and closets. At the same time, he also noticed that time-strapped consumers were commuting more and working longer hours. Often, they lacked the time to hit the gym.
Peloton’s breakthrough was offering a sleek $2200 connected bike with a screen where live classes taught by standout instructors simulated being at the gym. However, after a meteoric surge during COVID-19 (reaching a top valuation of $47 billion in June 2021), the company failed to anticipate so many customers wanting to return to the gym once the crisis abated. Today, Peloton trades at about $3 with an enterprise value of $2.7 billion.
Even for experienced leaders, it is easy to miss the signals that customer needs have shifted. As a futurist, I teach my clients the importance of keeping tabs on change of all types and in all its varieties and variations: regulatory, demographic, consumer, and technological.
The dairy industry didn’t see another type of threat coming at them. Result: sales of cow’s milk dropped over 46 percent as consumers switched to soy milk, almond milk, oat milk, and other non-dairy beverages.
Adaptation is fast becoming the critical success skill of the future. Rapid and unexpected shifts in consumer and market behavior are more common than ever. With the onslaught of generative artificial intelligence, stubborn inflation, supply chain disruptions, and geopolitical and climate shocks, understanding that our assumptions have not been accurate, and adapting to the unexpected becomes more important. And data, as useful as it often is, is a lagging indicator. What is needed in changing times are leading indicators.
As a futurist and innovation expert, I foresee a rate of change in the years ahead that will be unlike anything we have had to contend with in the past. These are early days in the Age of Acceleration. I calculate that there will likely be more change in the next 10 years than in the past 100 years. Think in terms of a doubling of climate disasters in the year 2034 just to get your mind around what’s likely ahead in just one category of change.
The leadership challenge is that post-Blockbuster, post-Kodak, and post-Blackberry, we assume we are on guard and alert. We feel we know what the future looks like. We misinterpret the signals. We don’t see the need to adapt.
Leadership teams need to grapple with new issues: are our early warning systems up to the challenge of rapid social, economic, technological, and demographic change? Are our risk management systems looking at future risk in the right way? Instead of preparing for the 100 flood, what about the 500-year flood? How are you preparing your team to challenge long-held assumptions?
Because the world is changing so fast, it won’t be the biggest companies that will navigate this uncharted landscape. Rather, it will be those who are agile, who can differentiate their offerings in crowded markets, and who can adapt rapidly who will own the future.
Of course, the need to adapt is nothing new. A century and a half ago, botanist Charles Darwin observed that it is not the most intelligent nor the strongest of the species that survives. “It is the species that is best able to adapt to the changing environment in which it finds itself.”
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