In volatile environments, linear thinking is dangerous. The challenge for leadership is not the avoidance of uncertainty, but rather the designing of strategies that remain resilient and opportunistic as conditions change.

Professor Shardul Phadnis presented this case study to an AFP Roundtable about Peloton’s experience during and after the COVID-19 pandemic. The company made a major strategic commitment based primarily on a single, dominant view of the future. This story is not about mismanagement. It’s about how easy it is — particularly when a company is in a period of rapid success — to let one narrative of the future block out all others.

The AFP FP&A Case Study series is designed to help you build up key FP&A capabilities and skills by sharing examples of how leading practitioners have tackled challenges in their work and the lessons learned.

Insight: Finance must hold multiple points of view about the future by keeping an element of doubt in planning, building flexibility into investments and scanning for changes in the environment.

Background

Peloton was founded as a technology-enabled fitness company that combined high-end exercise equipment with digital connectivity. What made it innovative was not merely the bike or treadmill itself, but the integration of hardware, software and community. Customers participate in live and on-demand classes, interact with instructors and work out with others — remotely but socially.

It began as a Kickstarter project in the early 2010s and grew rapidly. By 2019, Peloton had reached nearly $750 million in annual revenue and completed a successful IPO with a multibillion-dollar market valuation, making it one of the most successful consumer technology stories of the decade.

Peloton’s supply chain, like many global manufacturers, relies heavily on overseas production, particularly in Asia, with finished products shipped to customers via long ocean freight routes. Under stable conditions, the model is cost-efficient and effective.

Challenge

At the beginning of the pandemic, Peloton’s value proposition aligned almost perfectly with the global environment. Gyms closed, people were confined to their homes, social isolation was widespread — and the demand for connected home fitness equipment surged.

Within months, Peloton’s revenue had more than quadrupled, and its stock price rose dramatically. By the end of 2020, its market capitalization had more than tripled, reflecting investor confidence that the behaviors adopted during the pandemic would persist.

At the same time, the global supply chain was rapidly deteriorating. Factory shutdowns, labor disruptions and severe congestion at major U.S. ports created long delays and rising costs. Peloton struggled to fulfill orders, and the extended lead times frustrated customers, threatening brand loyalty.

Leadership faced a legitimate strategic question: How could the company reduce its dependence on fragile global logistics while supporting continued growth? The risk wasn’t in acting. It was in acting as though the current conditions wouldn’t change.

Approach

In 2021, Peloton made a bold decision: It would build its first large-scale U.S. manufacturing facility in Ohio — a roughly $400 million investment. The plant would produce bikes and treadmills domestically, shortening delivery times, increasing agility and reducing exposure to the risk posed by global logistics.

From the vantage point of 2021, the decision made sense. Demand was elevated and global shipping was unreliable. Customers were waiting months for delivery. If those conditions continued, domestic manufacturing would improve customer experience and protect the company’s growth.

Yet the decision reflected one critical weakness: The company implicitly assumed that this version of the future would persist.

Shardul Phadnis, Professor of Operations and Supply Chain Management at the Asia School of Business, describes how scenario planning could have helped them to see other options. Scenario planning is a reversal of the logic of traditional forecasting. Rather than starting from current conditions and projecting forward, leaders imagine multiple plausible futures and then work backward to test how today’s decisions would perform in each one.

Scenario planning, he notes, achieves three critical things:

1. It keeps doubt alive. Traditional forecasting often collapses uncertainty into a single expected path, creating a sense of precision that may not exist. Scenario planning resists this by holding multiple futures in view at the same time.
2. It builds flexibility through options. Instead of making large, irreversible investments tied to one assumed future, organizations design strategies that can expand, delay, scale back or pivot as signals emerge. Flexibility becomes intentional rather than reactive.
3. It improves sense-making through pattern recognition. Scenario planning helps leaders spot early signals and connect events to broader trends, allowing them to identify shifts sooner and respond more effectively.

There is no public evidence that Peloton formally stress-tested its Ohio investment against alternative futures. A scenario exercise in 2021 could have explored such possibilities as:

• A rapid reopening of economies and reversal of consumer behavior.
• Improvement in global logistics or a normalization faster than expected.
• Sustained labor shortages in U.S. manufacturing and surging costs.  

Instead of designing flexibility — such as staged investments, modular capacity or option-based commitments — the company made a large, irreversible bet.

The table below, developed by AFP, illustrates how multiple futures could have been considered side by side:

Bottom line: Forecasting compresses uncertainty into one number; scenario planning keeps uncertainty alive and builds options.

Outcome

Within eight months of announcing the Ohio facility, Peloton reversed course. In early 2022, the company halted plans to operate the factory and initiated a major corporate reorganization.

The reversal was understandable. Vaccines became widely available, gyms reopened and consumer behavior shifted. At the same time, U.S. manufacturing labor costs rose significantly, undermining the economics of domestic production. The future that had justified the factory investment did not fully materialize.

Peloton’s experience offers finance, strategy and operations leaders some important lessons:

• A single forecast is insufficient for long-term capital commitments. Traditional models often collapse uncertainty into one expected outcome. Scenario planning keeps multiple possibilities in view and tests whether a strategy can withstand them.
• Irreversible investments demand flexibility. Large capital commitments should be structured with embedded options whenever possible, allowing organizations to expand, delay or step back as the future unfolds.
• Success can be blinding. Peloton’s extraordinary growth reinforced confidence in a particular narrative of the future. Scenario planning exists to challenge dominant narratives, especially when it appears most convincing.
• Uncertainty is not a failure of planning — it is the reason to plan differently. Organizations that treat uncertainty as a design constraint, rather than something to eliminate, are better positioned to adapt when conditions shift.

Peloton’s factory decision was rational in the moment. The missed opportunity wasn’t in acting, but in failing to design a strategy that was resilient across multiple futures.