Peloton’s Lack of Planning: Part II
Earlier in the year, Peloton experienced troubles related to its leadership decisions during the coronavirus pandemic to expand well beyond its means. As part of their earlier strategic solution stable, Peloton decided to reduce the cost of its products. Those steps have not materially helped valuation so now, ironically, it is shifting to raise the cost of its products, close a significant number of stores and cut approximately 780 jobs. Their CEO has communicated their new focus is now on cash generation to give life to the company. For those that have been in business for a while, it is not a surprise that cash generation is important; in fact, we’ve heard the phrase ‘cash is king’ for generations. Alarmingly, Peloton to now come to this realization is striking. So, what are some of the fundamentals that seem to be missing? As we wrote earlier this year, Peloton seemed to have material gaps in their business planning (Read Previous Peloton Blog). In a sound business, they would be thinking about evaluating critical decisions across several possible scenarios to ensure the business is robust in a world that is constantly changing and dynamic. Another apparent strategic gap relates to risk management. Here are just a few risks that have materialized: Peloton had their exercise bikes used on two television series to ‘kill-off’ main characters; they have had parts falling off their equipment; some Peloton equipment has been labeled a safety hazard for children. And Peloton has had significant failures in the financial viability of their decisions. Solid organizations must have an annual process to review the risks to the business, and a more frequent cadence during unstable times. What are the customer risks? What are the market risks? How about legal and reputational risks? What other factors should they worry about that could impact their future success? Getting those strategic risks on the table to discuss and plan for would generate ideas on how to reduce the likelihood of those risks materializing. Once identified, there is no question that short-term adversity can translate into long-term advantage if properly managed. More sound strategic minded leaders could have helped avoid the sad personal impacts to Peloton employees and their families. And Peloton’s user customer base is likely a bit worried about the future value of the expensive exercise equipment if the company cannot succeed for the long term on delivering content to keep them biking. To learn more about appropriate strategic planning and risk mitigation, feel free to contact any one of our experts. Crisis cost time, money, customers, and careers, generally in that order. Peloton seems to be hitting on a number of these cylinders now.
What is Earned Media?
Kathleen Carins, EMMY Award-winning Television Journalist, who now uses her expertise as a Fallston Group Media Coach and Communications Strategist, shares her insights on “earned media” and some of the nuances involved.
Best Practices for Crisis Management in Corporations
As we all learned from Covid-19, everything changes when a crisis occurs. In the case of Covid-19, the unexpected and immense changes that erupted as a direct result of the pandemic impacted the course of history forever. Some might say that the change was for the good (remote work and blended models are now widespread and we care more about personal and public health). Some might say that the change was meant to wake us up to environmental issues. Some would say that the mask policies that were put into place because of Covid tested the willingness of the common person to put up with temporary discomfort for the betterment of everyone (recovery from the pandemic and a return to normal). Many would say that it tested our response rate to a widespread crisis. The truth is that there is a lot we can learn from Covid-19 when it comes to crisis leadership and best practices for handling adversity & crisis. Naturally, there were a lot of questions and a lot of solutions that were enacted quickly (as a crisis response) when covid-19 emerged. After all, there was no choice but to respond (the world, the country, government officials, business leaders and, yes, each of us). And the best practices for crisis resolution were generally respected. Attempts were made to respond accurately, consistently, and quickly. Whether we took it seriously or not was up to us. With millions of Americans dead, the virus took a huge toll on American lives and not everyone agreed with the Covid-19 response. The good news was that we responded effectively enough to learn a great amount from Covid-19 – understandably, the debate will continue about how effectively. In truth, no one was adequately prepared for such a widespread event. Combine a lack of preparation with a huge need to respond and you get a great, but costly, learning experience. Questions like “How will the economy fare?”, and “How long will they quarantine?”, and “when students (and workers) should return to work?” erupted. They followed with “When should mask mandate policies be removed?” and “will everyone take the vaccine when it comes out or will incentives need to be put in place?” These questions and answers were naturally debated, and they caused controversy as not everything was perfect. Still, whether it was perfect or not, the truth is that there was a crisis and there was a response. The response was very fast as borders closed, and everyone was told to stay at home and situationally wear a mask. Store supply and demand was tested (items were off the shelves quickly and were replenished). Stimulus checks were given. Vaccines were developed very quickly, and while there were setbacks, the good news was that the rollout of the vaccines quickened, and they were available to the public free of cost. Healthcare workers did a phenomenal job and were heroes during this dire time. The public also did its part overall (even though many didn’t want to cooperate). Lastly, the spread of misinformation about the disease had to be scrutinized over, and journalists and scientists were on the job to make sure we knew what was true from what was false – again, some will continue to debate. At the end of the day, our response improved over time. What we’ve learned from the pandemic is that a massive and life-altering crisis can happen, and there’s going to be a lot of uncertainty (and fear) and that it can change our ‘normal.’ So, as everyone has learned (and been humbled by in terms of the pandemic), a crisis is an unexpected or smoldering event that results in an emergency response. Serious and potentially devastating crisis events must be prepared for. If not, there is potential for company embarrassment, loss of money, loss of time, and loss of company or personal morale and loss of life. The good news is that we can prepare for a crisis, and we can learn from how other companies handled crisis events. The bad news is that corporations have not been known for having the best responses to crisis. No, in fact an emergence in crisis management is the direct result of the shortage of effective crisis management. So, now that we know that our crisis response can improve, it’s good to know that there won’t be an excuse anymore not to prepare for the worst events. With enough literature, statistics, and research out on the topic however we all can be prepared to handle what comes our way. If we start with foresight and a predictive mindset, it’s a brilliant way to start. Some of the best plans include having the foresight so see what crisis might come, evaluating plans for each crisis, and of course electing the best leaders, teams and spokespeople to become directly involved with every step of the crisis. With the right recommendations and the right people, a crisis response will break down into before, during, and after crisis stages. There is no doubt organizations can turn short-term adversity into long-term advantage. When it comes to a crisis response, we can start by looking at the numbers, and see crisis management a little more clearly, but the most important statistics on crisis management are as follows: less than 30% of respondents in a recent global crisis survey felt that their businesses crisis management functions were well composed. Yes, and of course, over 70% of respondents said that technology would help significantly with the organization and outcome of a crisis response team. Most importantly, most (or over 70% of business leaders) reported having a crisis happen to them within a period of the last 5 years. Most of the individuals (more than 90% of those surveyed) believed that a crisis would happen to them within the next two years, but less than 35% of people believed that their company was prepared. According to these statistics, risk can’t be ignored. According to Deloitte, the areas that frequently involve
Peloton’s Lack of Planning
Amid the height of COVID in 2020, Peloton’s stocks skyrocketed and increased by almost 440%. While many consumers were investing strongly in at-home workout machines, Peloton continued to advance its business goals by producing more, creating a wider variety of product, and making business decisions for 2021 and the years so come. Ah, the power of business planning – where did Peloton go wrong? In 2021, stocks dropped 76% and most recently in Q4 of 2021, the numbers were their lowest growth quarter ever. Now, the CEO is under fire as Peloton is halting production in 2022 to remodel their production, prices, finances, and business plans to reflect a more accurate valuation, as COVID numbers decrease and people are going back to work and have less of a need for at-home fitness equipment, especially when gyms are opening back up world-wide. Many competitors have emerged in the marketplace, most notable – Lululemon and NordicTrack. The bottom line, Peloton projected their numbers at their highest value point and quite frankly, didn’t do what we tell every client – “plan for adversity”. It seems like common sense and can be seen as naïve to think production would maintain at the momentum it was during a time where everyone was forced to stay indoors, but the mistakes were made and now their reputation is on the line. Peloton is currently laying off employees and closing stores due to their misjudgment on projections and finances. Right now, the CEO is denying that they are halting productions but gave a vague statement regarding their efforts towards increasing margins and improving costs for the company (which creates a very selfish image). Wall Street and the court of public opinion are not reacting well. What could have been done differently and what can they do in the future? Peloton failed to plan for a time in which competitors and adversity would cast a shadow on their product. The mishaps in production and projections were discovered early enough to make changes sooner, and this was a smoldering issue that the corporate offices new about and tried to do small things to change a big mistake. They began to slash prices, sacrifice quality, but then increased prices for delivery and set up; it was a complete scramble to correct margins. There was a complete disregard to consumer impact, and people began to learn the smoldering issues of Peloton very quickly. There is a trust that the court of public opinion shares with companies, especially those that align themselves with that organization and actually work for them. These very people are being laid off due to the corporate failures, and the court of public opinion is waiting to see how they will handle it. Peloton needs to be transparent, take responsibility for their miscalculations, and ultimately ensure that the corporate office, the stores, employees, and consumers are all aligned in how they are going to maintain integrity and the steps they will take to prevent this from happening in the future.
The Inner Journey of Authenticity in The Age of Resignation
During the course of my executive coaching, I assign my clients a book by Parker J. Palmer Ph.D, entitled “Let Your Life Speak: Listening for the Voice of Vocation. The significance of this reading assignment is that the author captures introspective insights that are very applicable in connecting with one’s self-awareness and authenticity, which is an essential element to one’s growth as a leader. Many of the selected insights and perspectives provided in the passages below are to be credited directly to Dr. Palmer’s book, his personal journey shared, and ever so timely in this era of self-reflection and resignation. My intention in writing this blog is to recognize this body of work for others and further expound on these selected insights, by applying them in the form of the Five Tips for Leaders to Remain Authentic. As leaders, we wield the power of casting either shadows or light into peoples’ lives… Good leadership requires reconciling our own inner shadows and light to connect with those we lead with authenticity. Leadership is a journey that is not for the faint of heart. We learn to sustain ourselves with positive thinking and seek to project confidence by doing so. Consequently, we can often fail to look introspectively inward to our own shadows and light and lose touch with our selfhood. We find comfort in believing that our efforts are always well-intended and that our power is exercised with compassion. Moreover, we can reconcile ourselves to think that the problem is with those we are trying to lead versus our inability to connect with their needs. Leaders need professional skills to manage the external world and introspective skills to journey inward toward their own shadows and light to fully embrace the human condition of the people around them. Those of us who gravitate to leadership positions tend toward extroversion, often ignoring what is occurring within us as individuals. We excel at compartmentalizing our thoughts and fears and separating them from our leadership persona. In doing so, we lose our authenticity, humanity and create shadows that distort our understanding of the needs of those we impact. We try to compensate for this darkness with the power of positive thinking. After all, that is what is expected of conventional leaders. Though this is a time where conventional styles work the best. Amid what has become defined as the resignation age, in which people are recovering from a pandemic driven survival mode and increasingly seeking to find more fulfillment in their work, it is now more than ever vital that we as leaders understand our inner shadows, find our selfhood, and project the light that is within us as leaders with authenticity. Five tips for leaders to remain authentic: Reflect on what truths you embody and what values you represent. Remain conscious and aware of your own emotional and psychological needs. Remember that you, as a leader, are not defined by the title or position you hold but gifted with the opportunity to shed light through your unique inner wisdom. Remain mindful that our selfhood and being authentic requires us to embrace what makes us different from others, recognize our unique strengths and frailties, and acknowledge our own needs and goals. Remember that we are human beings and that it is import to not lose sight of our authenticity by embracing our selfhood and thereby shed light into the life of those around us. * Citation: Palmer, Parker J. Let Your Life Speak: Listening for the Voice of Vocation. Jossey-Bass, 2000
The Most Important Message is the Message Received
Most public speakers and performers work relentlessly to ensure they use the perfect words at the precise time and in the proper sequence to make people think, feel and act differently. Whether a media interview, keynote address, board meeting or sensitive family matter, we all find ourselves ‘on stage’ with the opportunity to impact. Most think about what they are going to say before an upcoming critical moment. And afterwards, many of us replay that critical moment in our minds, from every conceivable angle. Sometimes we celebrate victory, most times we worry about what we said and obsessively dwell on how we may have dramatically missed the mark. Our unrelenting inner voice delivers repeated gut punches for our perceived gaffes and incomprehensible botched communicative moments: ‘How could I have done that…’ ‘I wished I would have said…’ ‘I forgot to say…’ ‘That didn’t sound right…” ‘I sounded like a jerk…’ ‘I can’t believe I said…’ ‘They think I’m an idiot…’ ‘That landed wrong…’ ‘I didn’t mean it that way…’ ‘It sounded wrong…’ ‘Did you see their faces…’ ‘How come no one said anything…’ ‘You could’ve heard a pin drop…’ ‘I just want to curl up and…’ ‘I wish I didn’t say anything at all – UGH!’ WELL, IT REALLY WASN’T THAT BAD! Please show yourself some grace and realize that dizzying feeling doesn’t translate to a Southwest Airlines ‘wanna get away’ moment. In fact, during your quest to seek reassurance by those who were either there, or your trusted circle you are continuously seeking perspective from, you quickly learn it really wasn’t that bad! We are our own worst critics – snap it away and know the people you are empowering with your ‘world’s worst moment’ aren’t even talking or thinking about you. Really, they are consumed with themselves much the same way we are when we hyper-analyze each syllable. I offer a tip that has dramatically helped me. Before each speaking role, I pray that whatever I say positively impacts at least one person. Within that meditation, I ask for divine wisdom to find the right words, despite my human-doomed prepped remarks. You see, I’ve wrestled with everything I’ve described but have peacefully landed in a unique place – while my words may not have been delivered the way I rehearsed or had hoped, they may have cascaded out of my mouth in the perfect way that someone needed to hear them. You see, my sense of perfection isn’t perfect, despite my long-term belief. After all, we are supposed to be speaking in service of those listening. The beauty…we may never know if our words landed perfectly, words that may shape someone’s life. So, before you get anxious about your next speaking opportunity, realize the most important message is the message received. And that magnificent ripple effect you unwittingly create could be traveling the universe in ways you could never have imagined. Own the stage, have faith and believe in a power larger than the moment.
Smoldering Vs. Sudden
Bottom line – Protecting your company’s valuation depends on how well you are prepared to face the court of public opinion. Crisis happens to everyone. The difference is those who are prepared to address smoldering issues proactively can prevent them from erupting. When done well, you can turn short-term adversity into long-term advantage.
Reputation leads to Trust and Trust leads to Valuation… And, Not All Currency is Financial.
Successful leaders and organizations understand the value of building, strengthening, and defending their reputation. Reputation is defined as: the beliefs or opinions that are generally held about someone or something. If we take a broader look at society, we believe that consumers are morally aligned with the brands they invest in and purchase from, more than they ever have before. In fact, 92% of millennials prefer to purchase from companies they feel are ethical….and 70% of them will pay more for products and services from socially responsible companies. So, the question is…what is the real value of investing in your reputation? Our answer, priceless. It is crucial to establish a business with a healthy foundation that embraces sound leadership, strategy, and communications tenants, and enables a transparent relationship with your workforce and consumer base. The court of public opinion is interested in who you are and what you have to say as a brand – especially when crisis occurs. Remember, the court of public opinion renders judgments much more quickly than any other ‘court.’ Not too long ago, Wells Fargo was leading the headlines for creating fraudulent savings and checking account on behalf of clients without their consent. What happened? Misreported sales numbers, billions in settlements, significant stock underperformance, and a change in leadership at the top. In a different but related event with Boeing, investigators found faulty 737 Max designs and training manuals which contributed to hundreds of deaths and grounding of hundreds of aircrafts. Once the news broke, their CEO was terminated and numerous layoffs occurred. The lawsuits began to pile in, $18 billion earnings loss (2019), and again a significant drop in the stock price. We tell every client, “reputation leads to trust, and trust leads to valuation – and remember, not all currency is financial” – because it’s the truth. By creating a strong relationship with your stakeholder base, and proactively telling your story, you can maintain a brand with a healthy reputation that is essential for success in today’s world.
Turning Adversity into Advantage, Hon!
A Fallston Group Case Study. Cafe Hon has been a popular fixture on the 36th Street main drag in Baltimore’s kitschy Hampden neighborhood since its 1992 opening. With a two-story tall pink flamingo perched over its doorway, the restaurant is a local landmark. Owner Denise Whiting sells “Hon” t-shirts and other merchandise and founded an annual HONfest that attracts attendees from all over the Baltimore metro area to celebrate the neighborhood’s wonderful quirks and creativity. At the advice of her legal counsel to protect her business interests in opening a Hon-themed giftshop, in late 2010 Whiting trademarked the word “Hon.” The term of endearment has long had a close association with working-class Charm City and was even popularized in the 1988 John Waters film Hairspray as referring to a certain type of 1960s Baltimore woman with a beehive and cat-eye glasses. Because of these things, Whiting experienced an immediate backlash as soon as news of her new trademark spread. The Crisis: People Hated That Whiting Owned “Hon” Although her trademark did not preclude people from using “hon” in conversation, Whiting rapidly drew bad press from the free, tabloid-sized City Paper to the Baltimore Sun. The local community began to slander her name and boycott her restaurant and the HONfest. Protestors gathered outside Cafe Hon to hold signs reading “HONicide: Life on 36th Street” and “You Can’t Trademark Our Culture, Hon.” One former patron took to popping his head into the restaurant during business hours to scream, “NO ONE OWNS ‘HON’!” Even her fellow merchants on “The Avenue” turned against her over her acquisition of “Hon” rights. Meanwhile, Whiting’s business was suffering, and she had to withdraw tens of thousands of dollars from her own retirement account to make payroll. The intense personal and emotional toll these events took on Whiting cannot be quantified. No question, Whiting was an amazingly strong successful woman who was now challenged like she had never been before. The Solutions: How Fallston Group Helped Whiting Restore Her Brand Tell Your Story. Our mantra, “If you don’t tell your story, someone else will. And, when someone else tells your story, it certainly won’t be the story you want told.” To regain the local community’s trust, having consistent and transparent messages were crucial. Fallston Group helped Whiting gain confidence while developing a core messaging and media plan. This focused on message points that Whiting could embrace as her own when talking with reporters, fellow business owners and customers. We encouraged and coached her so she would have confidence in telling her story to those who had an interest. Critically important were the varying audiences, messages, timing, platforms utilized and adaptations. Deal Head-on with Obstacles to Business as Usual. Fallston Group counseled Whiting about obtaining a peace order or filing criminal charges against anyone who was shouting into her restaurant, harassing her patrons, and threatening violence. Although people threatened to boycott the summer’s HONfest, we encouraged Whiting to continue her annual tradition. In our view, bulling and violence is not for free and those who believe they can victimize should be held accountable. Whiting proceeded with business as usual which was key to her success. It’s easy to be influenced by detractors, but that’s what they want you to do – quit. Whiting did not. Be Realistic. The crisis was personally hard on Whiting, enough to jeopardize running her business and leading her life. Fallston Group helped her see that success should be measured by her continued ability to do what she had always done – own a well-run restaurant. This meant bringing people from negative to neutral about her and Cafe Hon rather than making them advocates out of the gate. To take the first step, we accompanied her to many meetings, including merchant association meetings attended by other business owners, managers, and elected officials. Remember, this was a game of chess, not checkers – a long-term strategy where victory results in one small move after another. Know Which Battles to Fight. Although Whiting was solidly equipped legally about how trademarking “Hon”was something any sound business would do to protect its brand, in the end Whiting would win in the court of law but not in the court of public opinion. If you lose the latter, you don’t have a business. Again, Fallston Group routinely encouraged Whiting to look at the big picture. So, when she was contacted by celebrity chef Gordon Ramsay’s Kitchen Nightmares show, Whiting was eager to appear on national TV to tell people she was sorry and relinquish the term “Hon.” We felt this was the perfect opportunity to make a bold move and change the rules of engagement – move from defense to offense. The Result: Returning “Hon” Back to Baltimore After shooting her Kitchen Nightmares episode, Chef Ramsay joined Whiting for a press conference at the sparkling, new Cafe Hon, renovated with even bolder, leopard-print decor than before. During the press event, a relieved and hopeful-sounding Whiting returned “Hon”to the city – she also communicated this via a local radio station. Later that evening, Denise got a good night’s sleep – the first time in a year. Today, more than a decade later and despite the pandemic, Whiting is still dishing up her Hon’s hot crab dip. As you can imagine, we’re huge Denise Whiting fans – she showed true character, compassion, and discipline while in the belly of the beast.
8 Qualities All Crisis Leaders Share
When designating or hiring an employee to be your business’s crisis manager, there is a lot at stake. When selecting, consider one that shares these 8 characteristics.
