When Josh Switkes, CEO and co-founder of Peloton Technology, studied mechanical engineering at Stanford University in 2001, automated vehicles weren’t a big topic yet. Researchers were working on them, but mostly on small teams in academia and at some carmakers.

Toward the end of his PhD program, Josh spent three months in Germany at Volkswagen Group Research working with their human factors team. It was there that he experienced how quickly drivers could gain confidence in an automated system.

JS: As long as it worked as expected, it would take only 10–20 seconds after the drivers activated the system for them to take their hands off the wheel and start talking to my colleague.

After finishing his PhD, Josh started working full-time for Volkswagen in California. But after a while, he got the startup bug and joined Tula Technology, which had just been funded to develop more efficient engines. Josh was the first engineer hired and helped develop the core technology there. A few more years went by, and Josh started seriously thinking of starting a company of his own, brainstorming ideas with friends.

JS: We saw two big trends in the automotive industry: fuel costs were going up, up, up, and the cost of electronics, computing, and sensors was going down, down, down.

“We saw two big trends in the automotive industry: fuel costs were going up, up, up, and the cost of electronics, computing, and sensors was going down, down, down.”

Eventually, Josh shifted his focus from passenger cars to the trucking ­industry.

JS: I remember looking at statistics and writing in my notebook that $100 billion per year was spent on diesel fuel for trucks in the US. A few days later, I remember looking at this number, thinking, “$100 billion, can that be right?” and looking it up again. Once I saw that this number was right, I got really excited because I realized that trucking is an enormous industry, with huge pain points around fuel consumption and labor and crashes. I realized we could make a big impact, at least on fuel and crashes, with just our first product.

Connected vehicle automation

In 2013, Peloton started developing a level-one connected vehicle automation system for the commercial fleet industry that enables truck platooning.

Peloton’s platooning system is connected in two ways: through truck-to-truck communication and truck-to-cloud communication. With truck-to-truck communication, Peloton takes a pair of trucks, assigns one as the lead truck and the other as the follower truck, and automatically matches the actions of the lead truck in the follower truck.

JS: So, if the lead truck accelerates, the follower truck accelerates right along with it. And if the lead truck applies the brakes, the follower truck brakes as well. The way we do that is by sending data directly from the lead truck to the following truck. With this data, the following truck can know what the lead truck is doing before any sensor on the following truck, or the driver could possibly know it.

“So, if the lead truck accelerates, the follower truck accelerates right along with it.”

Pairing truck movements automatically reduces reaction time allowing the follower truck to draft the lead truck more closely saving up to 10% in fuel costs for the following truck and 4% for the lead truck.

Through truck-to-cloud communications, Peloton also provides information with a longer reach, such as traffic problems, road conditions, and weather, several miles ahead improving safety by allowing drivers to better anticipate potential hazards.

Peloton offers a step toward autonomous driving, but Peloton has no ­intention of replacing truck drivers anytime soon.

JS: There is always a driver in both trucks: the lead truck and the following truck. The following driver has full control of steering, changing lanes, and other functions. And at any time, they can regain full control of the vehicle as well.

Invaluable investors

Once Peloton got funded, developed a prototype, and demonstrated fuel cost savings, the company got more fleets interested, as well as more investors from the industry. At the moment, Peloton has financial investors such as NGP Capital, but also strategic investors from the industry such as UPS and Volvo.

JS: NGP Capital has helped us make the right business connections with complementary technology companies. They’ve also been very good at having events that bring in experts — including other portfolio company CEOs and founders, and external industry, M&A, and business experts — to share their expertise and experience with us and with other portfolio companies. NGP Capital has done that the best of any of my investors, and it has been invaluable.

The importance of being grounded

Being grounded in the needs of the customers has been one of the biggest ingredients for success at Peloton. Peloton learned early that the fleet industry’s thin profit margins mean that the cost savings they provide can equate to a massive improvement in profits for their customers. For this reason, they have found that new technologies can be adopted very quickly, but that it is equally important that they don’t disturb the core business.

JS: We like to talk about “pragmatic innovation” — focusing on real solutions that bring real value, while also being innovative in our approach to problems. We spend a lot of time with our customers. We do in-depth interviews with truck drivers every few months, discussing a variety of topics. We spend time meeting with fleet managers, showing them products, or ­mock-ups of future products and getting their feedback.

“We like to talk about “pragmatic innovation” — focusing on real solutions that bring real value, while also being innovative in our approach to problems.”

When truck drivers first hear about platooning, they tend to have some initial concerns and questions. They have been trained not to follow closely on the road, so platooning goes against what they have been taught.

JS: When we explain the capabilities of the system, the truck drivers start to get more comfortable with it, realizing that the system has information they don’t have. Once they get in the truck and experience platooning, it completely changes their view of it.

Business and technical go hand in hand

As CEO, Josh is primarily concerned with the business side of Peloton, but with a PhD in mechanical engineering, technology insight informs the business decisions.

JS: I find it very useful that I have both a business and a technical background because technical decisions should be driven, at least partially, by business concerns and objectives.

As a CEO, one of the biggest learning points for Josh has been how to ­manage the organization as it has grown. His advice for other entrepreneurs: making timely organizational adjustments is important. Belated changes are just as bad as, and maybe worse than, making them too early.

“As a CEO, one of the biggest learning points for Josh has been how to ­manage the organization as it has grown.”

JS: We started with four founders; now we are 87 people. As we have grown, there have been a number of things that have had to change, especially in terms of organization and processes. You don’t want to disrupt what’s working, but you need to update and change things to make sure they keep working. It’s important to choose the right time to add layers of management, full-time HR people, in-house IT, and the like.

Building a team in a heated market space

At the moment, Peloton focuses on the US market, but they are also looking at other markets around the world like China, Australia, Western Europe, and Central and South America.

Josh believes that Peloton offers a path to autonomous trucking while offering a pragmatic solution with near-term safety and cost-saving benefits, which has helped attract customers, investors, and talent.

JS: If you care about safety, we are saving lives. If you care about highway congestion, we reduce crashes and the resulting traffic snarls. If you care about the environment, we are reducing carbon emissions. If you care about energy independence, we reduce fuel consumption. For me, we’re doing something real that has a positive benefit for the world, and that’s exciting every day.

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