this is everything we learned at Harvard Business School in 30 minutes I'm Sheree I'm Jean and we're the tiger [Music] sisters welcome to season 4 of The Tiger sisters podcast yeah so if you're new to this channel Gina is my older sister she went to Harvard Business School she is my role model best friend we have this podcast together and just a little bit more background of who she is she's an absolute badass badass Bach she started her career out at Goldman Sachs working in finance and then she's pivoted to working in Tech as a product manager at Zinga the gaming company and most recently at Snapchat as head of product for augmented reality monetization and Gan went to Harvard Business School she graduated in 2017 she has over 50 patents in Ai and I'm able to talk about this because she won't brag about herself and I have to brag about her so as you know we're talking about Harvard Business School everything she learned there I went to Stanford's business school and I just graduated a few months ago so this is fresh on our minds and we want to give you a crash course in the next 30 minutes we're going to race through all these Concepts so buckle up we're going to go through four main Concepts strategy marketing product development and finance so what we're going to do throughout this episode is we're actually going to bring in examples for each of these sections so that we can talk through the company and you can really understand how these Frameworks apply just like we would in business school I learned best through examples so I'm really glad we're going to put this to the test and by the end of this episode you're going to have a mini Harvard MBA basically saving you $250,000 that's right we both spent $500,000 collectively on our mbas and you're going to get this for free not including not including the travel expenses fun and extraneous travel expenses so we're going to Dive Right In right after this break hey guys quick break to let you know that we now have merch on sisters maa.com we have sweatshirts and t-shirts that we designed ourselves go check it out and please rate US five stars on Spotify and apple podcasts these ratings are so important for the distribution and survival of tiger sisters podcast thank you for your support so let's get started with strategy so strategy is where Harvard Business School really I think differentiates themselves or at least where they strive to differentiate themselves and where where they shine yeah so at HPS strategy is not just a buzzword it's a road map for where to compete and how to win in a complex Marketplace and without a clear strategy even the best products or the best companies will not be able to succeed a classic HBS tool is Michael Porter's five forces which analyzes the five components of strategy Porters 5 forces was actually invented at HBS so we bring it up all the time porters 5 forces are are as follows thread of new entrance bargaining power of suppliers bargaining power of buyers thread of substitutes and rivalry among existing competitors so let's say we are going to use Starbucks as the example everyone knows Starbucks and that's actually kind of like a classic um business school company example so let's start with Starbucks and thread of new entrance so the way to think about the threat of new entrance is that from Starbucks perspective one of the reasons why they're super successful is because it's really hard to to start your own coffney company and go against big people like Starbucks Starbucks already is a pretty massive company so they spend a lot of money on brand awareness supply chain efficiency and they have a lot of money to spend on having the best real estate so they can have the best stores and the best locations you might be able to open up a small coffee shop but going against Starbucks for these reasons can be pretty hard so then I would say thread of new entrance for Starbucks is actually pretty low yes so the second is bargaining p power of suppliers yeah I feel like this is a pretty easy one because the scale of Starbucks is so massive and obvious that they have incredible bargaining power with suppliers um they buy in a huge bulk volumes so because of that they can really control and push down the prices yeah that's kind of similar to Walmart as a classic example that has incredible bargaining um Power with suppliers also Costco those are some of the other ones that get brought up a lot yeah the big names okay Sher what about the bargaining power of buyers so the way to think about this is from the customer perspective the customer can go to other brands out there of coffee places like you could go to Dunkin' Donuts you go to Phils or pets but honestly like there is pretty high brand affinity for the customers Starbucks has loyalty programs they have like cool seasonal drinks customers want to buy Starbucks Starbucks has also invested a lot in this area through their technology Investments so creating the app where you deposit money into your Starbucks account ahead of time kind of locks in the customer um and sort of decreases the buyer bargaining power in some ways cuz they literally have a ledger with you yeah and I guess the last part about Starbucks is that it was one of the bigger names to create a third space and now there's like so many other third spaces but Starbucks is really known for being like that place away from home where you can hang out you bring a laptop meet up with people so in the customer's mind like it's still like let's meet up at Buck mhm yeah it's ingrained after having been in your sort of routine and your go-to third place for so many years ever since for us since high school or middle school even Middle School not my caramel ma my ice caramel macchiato oh my gosh it was the ultimate tree it was so the ultimate sweet treat yes before we knew about calories before I cared about calories and and the effects of caffeine on stunting my height as a 13-year-old in middle school but I love that ice caramel macchiato I felt felt like a queen drinking that but we digress back back to the lesson back to the lesson okay so the fourth Force to talk about is the threat of substitutes yes so if you think about coffee as a category there are a lot of substitutes you can make coffee at home you can get coffee in the office Etc but I think what Starbucks has done a really good job of is expanding into adjacent categories so that they sort of um diversify their Holdings and then decrease the threat of substitutes so Starbucks also makes those um little pods right coffee pods they make coffee beans that you can buy they make ground coffee so they're not just a retailer of coffee in their retail locations only they've done a really good job of sort of mitigating the um the risk of sub the risk of substitutes so I would say their risk of substitutes is moderate yeah the last of Porters five forces is rivalry among competitors so how does Starbucks uh line up here so I mean there's a bunch of different competitors in the coffee space but Starbucks stands out because they're consistently delivering on the customer experience in store and setting itself apart with its premium pricing there was an hbr piece recently on how Starbucks has gone above and beyond on customer service and also I know in the most recent years there have been kind of some bad press that Starbucks has had recently um especially over the last like 3 years but they've like completely jumped on top of that and tried to mitigate any of the bad press that they had recently um the Pres the Starbucks like CEO president has gotten ahead of that and so they're just really trying to put the customer service at the Forefront a Starbucks employee called police on these two men who were like these two black men sitting in Starbucks I vaguely remember and they were arrested um even though they didn't do anything wrong but then Starbucks like really put a forward an apology and we're just like how do we make this right yeah so that is the framework of Porter's five forces anytime that you're thinking about a company evaluating a company you want to ask yourself these questions and go through this framework and then that way you can understand their landscape and where they sit amongst all of their competitors another key HPS principle is choosing basically how you'll compete so competitive positioning Porter's generic strategies basically say that companies pursue one of two approaches either cost leadership or differentiation so cost leadership means being the lowcost producer so again the leader in the space is Walmart they are all about getting the lowest price possible for you and doing anything they can and then also scaling back on other um amenities so that they can always get you the lowest price and that works for Walmart because that plays into like their offering people go to Walmart for the cheapest like their logo is like everyday savings right that's their core value yeah exactly versus differentiation means offering something that is valuable to the customer that might be at a premium so thinking about cost leadership and and differentiation which one do you think Starbucks falls into answer in three 2 one differentiation differentiation differentiation so Starbucks offers more premium price coffee and also because of the things that we just named before like their focus on third spaces they're focus on customer service they try to differentiate by giving you a better experience than just you know the the lowest cheapest experience yeah the example that comes to mind for me is the writing the names on the cups right that is one extra step in their yeah it's like an extra step in their um operations that honestly is not really necessary for a generic experience but it's caused so many it it means a lot to people I think to feel personalized and also it causes some funny memes yeah alth it's actually paid off in Spades for them I think they've stopped like writing I don't know if you've been to a Starbucks recently but now they're like printing printing it out like the names yeah oh sometimes they still write it maybe my online orders they just printed out um but then I think recently there's been a mandate I saw this online there's an article where like the um employees of Starbucks were asked to like write more personalized messages on the cups Rec exactly I saw someone uh someone I I know wrote like I love you so matcha someone or someone received a cup that said I love you so matcha and she actually posted it on her instram she's like oh this totally made my day yeah I mean that's just one example of differentiation yeah a high high touch so the one thing you can take away from this lesson is that you can't be the cheapest the best and the highest quality all at the same time just like Starbucks they chose to be higher quality and more expensive and one example that comes to mind for us is sister's matcha right sisters matcha which is our company is a Ultra Premium matcha brand and it's Ultra premium product so even if we wanted to offer it for Less we just couldn't because of our supplier cost and the fact that the matcha that we provide is um The Cult of ours called akador which only makes up 2% of all of the matcha produced in Japan so by definition it is very rare it's very hard to cultivate it has to be handpicked like all of these different reasons contribute to the fact that it's a premium product so for us we went the way of differentiation as opposed to cost yeah which makes sense for like the stuff like who we are as well like we enjoy nicer stuff and we also like matcha like when we're drinking ceremonial grade first harvest matcha like you want it to be the good stuff that you're putting into your body like exactly so for us it wouldn't make sense to start a brand that is oriented on cost leadership because that doesn't align with our own personal brand on our own values for something that you are basically consuming every day and putting into your body and that's meant to help you and improve your health very true and also it's just beautiful and so freaking good um but yeah so these are things that like this is just another example for you guys to see like Starbucks is obviously a huge Behemoth but these are things that we've thought about when creating our own company which is very very small and is kind of a startup yeah and also just like breaking into the matcho world like we were asking these questions of ourselves to each other of our brand and where do we want to sit and making these very intentional decisions so that you know we can be successful so that concludes our mini lesson on Porters 5 forces next we're going to be talking about marketing one of the first big concepts for marketing at HBS is STP segmenting targeting and positioning STP is all about identifying specific customer groups choosing the right customer group for you and then crafting a message for that customer group specifically and then making sure it sticks so I think that all sounds pretty straightforward and simple but it's the backbone of essentially any marketing campaign in any marketing go to Market Force okay I love that one of the examples that we're going to use in our discussion and our Mini case study is warie Parker which is one of the most recent big big successes in the direct to Consumer dtoc world yeah so wary Parker actually is a really good example of a company that came in and disrupted a massive Marketplace that was Run by One Behemoth essentially luxa so luxa was accounting for like 80 plus almost 90% of the eyewear Market the optical eyear Market glasses and they basically any brand you could think of was produced by luxotica so they were essentially a monopoly which is crazy by the way if you guys don't know Loda like look it up like they own like rayb bands they own like all the big names you're like Oh I thought rayb band was itself nope it's owned by this like one company and if you guys remember buying glasses optical glasses in the '90s or the 2000s it was a really big deal like you would pick out a pair of glasses you would get them made and it was always $300 plus do if wanted that was remotely cute yeah it was it's really expensive and so War Parker came in they like completely shook up the model they're D to see and mostly like started online so they started with their like try on phase you can try on a bunch of glasses they would mail it to you it was also much cheaper than what you would get originally with the other model okay so good summary so let's talk about how they used STP to break into this market so the first part is segmenting so what they did was they looked at the market and they said okay there're actually multiple different types of buyers for for glasses right there are people who are super high-end and they want really really fancy glasses maybe that's not really us because they just want brand names they want Prada gu Versace Gucci I want Prada anyway and then there's another Market which is cost conscious so people who just want to the lowest possible price right kind of like what we talked about before and then they identified a third Market which was essentially Millennials people who wanted something that was trendy and still looked good but not necessarily didn't necessarily have to be um the specific brand name right so the T in STP is targeting so after they identified these different segments they decided which segment to actually Target you can't do all of them really well in fact if you try that you're probably going to do a pretty bad job you should be very focused on which segment you Target and so then they ended up choosing the third segment which is the cost conscious Millennials who want something cute but something not too expensive and so then Warby Parker after they chose their segment they basically created their company around this target segment and basically what does this target segment care about and how can they cater to their needs and so the first thing is that this target segment is online first like Millennials are very comfortable buying things online having things shipped to their house than like previous generations the second thing we just mentioned is price and fashion Warby Parker started around $95 to $100 and this is a very affordable price range that Millennials are willing to opt into and the last is like social impact Millennials are more conscious about the impact that they're leaving in this world and wary Parker like created a program knowing this where they like you know it's buy a pair of glasses give a pair of glasses and so they were able to tap into these three sentiments that this segment really cares about great description so so the last part of STP is p which is positioning which is essentially wary Parker asking the question and answering it how do we want customers to see our brand so the answer to this was one they wanted people to see their brand as modern Chic and accessible two they wanted customers to see their brand as digital first so everything basically started with the website and then from the website you could pick which glasses you wanted to try on they would mail it to your house and then you can select your glasses from there and then three they also leaned very heavily on this sort of of sustainability and helping other people in the world narrative so that they really tied that into pretty much all of their branding and all their marketing yeah another company that I think about that fell into this category although it's like not really popular anymore but it's like cater towards Millennials was Tom's if you remember those shoes like 15 year 10 15 years ago they were all the rage when they first started out everyone wanted a pair of TOMS which a pair of flats a pair of canvas cloth Flats but the biggest part of their campaign that seared into my mind is that you give a pair of you buy a pair of shoes they give a pair of shoes to a child in need in a developing country and so it was just like really interesting that like 10 15 years ago I think that's also when warie Parker also started too like there was such a huge focus on these companies to have a sustainability Bend yeah and it was also a very novel concept that doing good in the world sort of that your company would be have that as part of its company ethos true and so then that also I think elicited um a lot of people who became brand loyalists for that reason because they wanted to feel like hey this brand represents my morals represents how I move in this world yeah conscious consumerism actually that's so interesting that was new at the time yeah I think also coming out of that were companies were like uh rothy another shoe company that you know was like conscious Eco they don't have like a give and get program but like they try to do recycled water bottle shoes sustainability sustainability Bland sustainability Bend so it's really interesting I'm sure there's another case study out there about like the trickle effects of these giant companies establishing themselves and how people follow that Trend yeah maybe it's kind of more it's almost like taken for granted now that that's sort of part of a lot of the DNA of a lot of companies yeah so now Warby Parker is valued at more than a billion dollars they have so many cute little boutiques in like basically every major city and they're doing super well and the main conclusion from this discussion from STP is that you should choose a Target segment and be hyperfocused on the population the community that you want to serve because if you're trying to serve everyone you're really serving no one and you're not going to be doing a good job you really need to be focused on your target segment so if you're launching your own brand you want to ask who specifically do I want to serve and then what you do is you actually think about these people and then you build your entire brand in your strategy around their hopes their dreams their frustrations and their values the best products that I've ever used um are the ones that are like hyperfocused on their customers and understanding them super deeply all right that concludes this section we're moving on okay so the next section we're going to talk about is product Innovation so for product development and Innovation between the two of us we've worked on this for almost 20 years crazy put together so we could probably talk about this for a thousand hours so we'll just go really really quickly into the main takeaway the number one thing to know about product development that we learned at HBS is that you can't just guess at what a person's problem is you have to really very specifically identify the customer's problem and work to solve specifically that and the example we're going to use is Netflix there's actually a lot of business school cases written about Netflix yeah actually um I met Reed Hastings because he came to um Stanford GSB last year when I was a student and he um gave a speech oh nice yeah and I read his book and I've done like a book report on on him so a book report I literally did a book report how old were you this was last year when I was a student at Stanford so you're obsessed with him kind of so I'm really excited to talk about this oh good the main takeaway here and it's kind of related to our previous section but it's getting to know your audience and your customers super deeply and we're just going to give you two specific tactics on how to do that and the first is user feedback and iteration one way to do this is AB testing famously Netflix ran a bunch of ab tests meaning they ran like two different types of products with their customers to see which one they liked better all of this is in service of getting to know their customers and what their customers prefer yeah Netflix is infamously known for always AB testing every single little thing so one example that you may or may not notice is if you compare your Netflix account with your friend's Netflix account and you look at the same title that's being presented to you you may have a different um photo for for the title you may have a different thumbnail so for example one thing I noticed is that um I think Netflix has identified that I like handsome Asian men because who doesn't though because for shows that for example if there's like a movie with Henry Golding in it they'll always show Henry Golding as the thumbnail versus for someone else they'll show the other main character who's actually the main character when Henry Golding is more like a secondary character I want to see Henry Golding in every thumbnail so they know that I'm more likely to click into this the movie when they're showing me Henry Golding versus the actual main character who's not him and this is my cue to promote Our dating episode podcast so if you guys are new to our podcast here at Tiger sisters we also talk about lots of other things outry buing this so check out our dating podcasts so the main takeaway from this section is to really understand the problem that you're trying to solve iterate like crazy and don't be afraid to Pivot when you get new data and information and test test test test test test and our last and final section in this episode is on finance here are some terms that you should know and also like how to not feel dumb in these conversations yeah and the HBS approach to finance that they would always tell us over and over is not that every single student at HBS is supposed to graduate as some sort of financial genius and be able to actually run DCF models on your own all the time it's actually more so that you want to graduate with the ability to run your own company or be a CEO somewhere and have conversations with the CFO and with the board where they talk about finance and you understand everything that they're saying so that's really the goal I actually like that approach because I don't personally enjoy being in the weeds of finance and actually putting together all the models myself but I love to talk with my counterparts in the Financial Group about how things are going and like adjusting the um projections and getting more money I mean but also it goes to say like if you are a CEO or a leader of a company like it's not your job to be the expert like that's the CFO that's like your right-hand man or woman who is supposed to better understand it as the expert and like help you make decisions with that information right but you need to understand understand what they're presenting to you so that you can make those decisions with confidence and then also represent all those decisions to the board true that so we're going to go really quickly through five Concepts the first one is revenue versus profit Sheree can you start us off with Revenue versus profit okay guys this is the first concept you really need to know you've heard of Revenue you've heard of profit how are they different and we're going to use the example of Netflix revenue is how much money is coming through the door and with Netflix it's basically like their subscription fees profit is what's left after all the bills are paid so Netflix is a tech company they probably have a lot of servers they have employees they need to pay all those costs profit is after all those costs are covered this is really important because you can have billions of dollars of Revenue like you can bring in a lot of cash but if you have really high costs you might still not be a profitable company the next concept we're going to talk about is cash flow Jean can you explain this sure so cash flow is essentially the closest item to I think your bank account so if you think about Netflix what they do is they invest billions of dollars upfront to actually produce the shows that they produce in house so those shows are actually marked as a asset so you can it can seem like you actually have that money on hand in terms of your balance sheet but you don't actually have the cash on hand so that's why it's really important to differentiate between cash flow and revenue versus profit yeah and something they say in business school when they're like evaluating businesses some businesses might be cash poor they might just not have a lot of cash on them yeah and then some businesses are seem very very boring but they actually throw off cash in a very recurring um Manner and then the third concept to talk about is unit economics this is a really important term to know and to understand because like whenever you're evaluating a company like it will always inevitably come up people will ask about the unit economics so the unit economics actually just refers to the cost per unit and in this case of Netflix it's the cost per subscriber for Netflix it's like the margin that you get per subscriber so for example each subscription cost $10 you get that money in but then for Netflix they have to like create movies and TV shows and if they're able to like figure out each subscriber actually cost them $12 then they're like losing money yeah it makes sense I think also in terms of marketing a lot of times people look at um the cost for marketing versus your lifetime value of the subscriber so you need to make sure that the amount you're spending to get each incremental subscriber or her each unit economics makes sense in terms of how much you think that they're worth so that's actually a lot of times companies such as Netflix I know for sure actually Netflix spends a ton of time doing this analysis with their their hordes of data scientists yeah and I guess for us for sisters matcha for our matcha brand um something we think about is unit economics so basically for our brand the example is like breaking it down per customer if they're ostensibly if they're a first-time customer they're buying one how much does it cost for us to um you know make the can per can what is it if we're shipping all these cans just bring it down to the most basic unit of just one can well per can per can exactly yeah so the fourth Finance term you should know is forecast and Runway yeah so this one's pretty simple Runway is basically how much money do you have left if you continue just spend at your existing burn rate so if you're spending for example $100,000 per year how much money do you have if you only have $200,000 a year your Runway is 2 years after that you will run out of money so as a CEO you have to always be looking out for your run rate to make sure that you can stay afloat and the last group of Finance terms you need to know are valuation metrics these are terms that you've probably heard about or read about somewhere maybe in the Wall Street Journal for example price to earnings ratio or EV to EA do that's Enterprise Value to EA these are all things that essentially are projecting what the Worth or value of your company is don't be afraid of these acronyms because it's just a way for investors to express the value of your company and the actual number itself doesn't really mean anything unless you look at it within the context of what your category is so if you look at a company and you say oh they have a price to earnings of 20 that could mean that they're doing amazingly or it can actually mean that they're really below the bar depending on what category they're in so it's like Tech versus you know Industrials for example so we can talk about this for way way way more but we're not going to we're just going to leave it at that and let us know if you have any questions in the comments and if you want us to do a longer episode on this yeah so that wraps up the HBS hard skills you need to know there's so much more we can talk about the soft skills on leadership and networking which is honestly what HBS and business school is known for M thank you guys so much for tuning into this episode please leave comments about what you want to learn more about and we'll create a follow-up episode on that and please remember to like comment and subscribe and please leave five star reviews on Spotify and also Apple podcast it helps us so much and it keeps our podcast alive if you enjoy this podcast episode please share it with someone who might find it helpful and leave any questions you guys have in the comments this is honestly one of our first like explainer episodes and if you want to see more stuff like this please let us know and give us suggestions we read every single comment thanks for tuning in bye hey everyone quick break to share something special sisters matcha we've launched limited batches of ceremonial grade single estate single cultivar matcha straight from the family farm sh worked on in Japan it's pure authentic and crafted with intention head to sisters mata.com to grab yours before it sells out make matcha your daily ritual for lasting energy and focus