1 00:00:00,200 --> 00:00:03,840 This is everything we learned at Harvard Business School in 30 2 00:00:03,840 --> 00:00:07,120 minutes. I'm Cherie, I'm Jean, and we're 3 00:00:07,120 --> 00:00:23,360 the Tiger sisters. Welcome to Season 4 of the Tiger 4 00:00:23,360 --> 00:00:26,840 Sisters Podcast. Yeah, so if you're new to this 5 00:00:26,840 --> 00:00:29,480 channel, Gina's my older sister. She went to Harvard Business 6 00:00:29,480 --> 00:00:31,560 School. She's my role model best friend. 7 00:00:31,560 --> 00:00:34,560 We have this podcast together. And just a little bit more 8 00:00:34,560 --> 00:00:38,440 background of who she is. She's an absolute badass, badass 9 00:00:38,440 --> 00:00:42,120 and biatch. She started her career out at 10 00:00:42,120 --> 00:00:45,040 Goldman Sachs working in finance, and then she's pivoted 11 00:00:45,040 --> 00:00:48,760 to working in tech as a product manager at Zynga, the gaming 12 00:00:48,760 --> 00:00:53,480 company, and most recently at Snapchat as head of product for 13 00:00:53,640 --> 00:00:57,120 augmented reality monetization. And she went to Harvard Business 14 00:00:57,120 --> 00:00:59,000 School. She graduated in 2017. 15 00:00:59,000 --> 00:01:02,760 She has over 50 patents in AI, and I'm able to talk about this 16 00:01:03,240 --> 00:01:05,560 because she won't brag about herself and I have to brag about 17 00:01:05,560 --> 00:01:07,640 her. So as you know, we're talking 18 00:01:07,640 --> 00:01:10,440 about Harvard Business School, everything she learned there. 19 00:01:10,440 --> 00:01:13,280 I went to Stanford's Business School and I just graduated a 20 00:01:13,280 --> 00:01:15,400 few months ago. So this is fresh on our minds, 21 00:01:15,640 --> 00:01:18,560 and we want to give you a crash course in the next 30 minutes. 22 00:01:18,560 --> 00:01:22,280 We're going to race through all these concepts, so buckle up. 23 00:01:22,720 --> 00:01:27,000 We're going to go through 4 main concepts, strategy, marketing, 24 00:01:27,040 --> 00:01:29,120 product development and finance. So. 25 00:01:29,320 --> 00:01:31,240 What we're going to do throughout this episode is we're 26 00:01:31,240 --> 00:01:33,680 actually going to bring in examples for each of these 27 00:01:33,680 --> 00:01:36,120 sections so that we can talk through the company and you can 28 00:01:36,120 --> 00:01:39,440 really understand how these frameworks apply, just like we 29 00:01:39,440 --> 00:01:42,160 would in Business School. I learned best through examples, 30 00:01:42,160 --> 00:01:44,440 so I'm really glad we're going to put this to the test. 31 00:01:44,600 --> 00:01:46,520 And by the end of this episode, you're going to have a mini 32 00:01:46,520 --> 00:01:49,840 Harvard MBA, basically saving you $250,000. 33 00:01:49,840 --> 00:01:52,240 That's right. We both spent $500,000 34 00:01:52,240 --> 00:01:54,240 collectively on our MBA S and you're going to get. 35 00:01:54,240 --> 00:01:57,320 This for free, not including not including the. 36 00:01:57,880 --> 00:02:02,200 Travel expenses, fun and extraneous travel expenses. 37 00:02:02,480 --> 00:02:05,120 So we're going to dive right in right after this break. 38 00:02:05,360 --> 00:02:08,240 Hey guys, quick break to let you know that we now have merch on 39 00:02:08,240 --> 00:02:11,200 sistersmatcha.com. We have sweatshirts and T-shirts 40 00:02:11,200 --> 00:02:13,880 that we designed ourselves. Go check it out and please rate 41 00:02:13,880 --> 00:02:16,760 US five stars on Spotify and Apple Podcasts. 42 00:02:16,760 --> 00:02:19,440 These ratings are so important for the distribution and 43 00:02:19,440 --> 00:02:21,520 survival of Tiger Sisters Podcast. 44 00:02:21,720 --> 00:02:24,160 Thank you for your support. So let's get started with 45 00:02:24,160 --> 00:02:26,840 strategy. So strategy is where Harvard 46 00:02:26,840 --> 00:02:29,680 Business School really, I think, differentiates themselves, or at 47 00:02:29,680 --> 00:02:31,720 least they strive to differentiate themselves. 48 00:02:32,040 --> 00:02:36,200 And where where they shine. Yeah, so at HBS, strategy is not 49 00:02:36,200 --> 00:02:39,520 just a buzzword, it's a road map for where to compete and how to 50 00:02:39,520 --> 00:02:41,360 win in a complex marketplace and. 51 00:02:41,360 --> 00:02:44,680 Without a clear strategy, even the best products or the best 52 00:02:44,680 --> 00:02:46,960 companies will not be able to succeed. 53 00:02:47,120 --> 00:02:48,960 A. Classic HBS tool is Michael 54 00:02:48,960 --> 00:02:52,760 Porter's Five Forces, which analyzes the five components of 55 00:02:52,760 --> 00:02:54,840 strategy. Porter's five forces was 56 00:02:54,840 --> 00:02:58,360 actually invented at HBS, so we bring it up all the time. 57 00:02:58,600 --> 00:03:00,520 Porter's five forces are as follows. 58 00:03:00,800 --> 00:03:03,600 Threat of new entrants, bargaining power of suppliers, 59 00:03:03,960 --> 00:03:07,520 bargaining power of buyers, threat of substitutes, and 60 00:03:07,520 --> 00:03:09,760 rivalry among existing competitors. 61 00:03:09,920 --> 00:03:13,120 So let's say we are going to use Starbucks as the example. 62 00:03:13,120 --> 00:03:15,280 Everyone knows Starbucks, and that's actually kind of like a 63 00:03:15,280 --> 00:03:17,880 classic Business School company example. 64 00:03:18,200 --> 00:03:21,720 So let's start with Starbucks and threat of new entrants. 65 00:03:22,040 --> 00:03:24,640 So the way to think about the threat of new entrants is that 66 00:03:24,640 --> 00:03:27,480 from Starbucks perspective, one of the reasons why they're super 67 00:03:27,480 --> 00:03:30,720 successful is because it's really hard to start your own 68 00:03:30,720 --> 00:03:34,280 coffee company and go against big people like Starbucks. 69 00:03:34,360 --> 00:03:37,760 Starbucks already is a pretty massive company, so they spent a 70 00:03:37,760 --> 00:03:41,680 lot of money on brand awareness, supply chain efficiency, and 71 00:03:41,680 --> 00:03:44,440 they have a lot of money to spend on having the best real 72 00:03:44,440 --> 00:03:47,400 estate so they can have the best stores in the best locations. 73 00:03:47,400 --> 00:03:50,000 You might be able to open up a small coffee shop, but going 74 00:03:50,000 --> 00:03:53,320 against Starbucks For these reasons can be pretty hard. 75 00:03:53,920 --> 00:03:56,400 So then I would say threat of new entrance for Starbucks is 76 00:03:56,400 --> 00:03:59,600 actually pretty low, yes. So the second is bargaining 77 00:03:59,600 --> 00:04:01,840 power of suppliers. Yeah, I feel like this is a 78 00:04:01,840 --> 00:04:05,840 pretty easy one because the scale of Starbucks is so massive 79 00:04:05,840 --> 00:04:08,520 and obvious that they have incredible bargaining power with 80 00:04:08,520 --> 00:04:12,240 suppliers. They buy in a huge bulk volumes. 81 00:04:12,240 --> 00:04:16,279 So because of that, they can really control and push down the 82 00:04:16,279 --> 00:04:18,519 prices. Yeah, that's kind of similar to 83 00:04:18,760 --> 00:04:22,600 Walmart as a classic example that has incredible bargaining 84 00:04:23,080 --> 00:04:25,440 power and buyers. Also Costco. 85 00:04:25,440 --> 00:04:27,240 Those are some of the other ones that get brought up a lot. 86 00:04:27,240 --> 00:04:28,400 Yeah. The big names. 87 00:04:28,520 --> 00:04:31,560 OK, Sheree, what about the bargaining power of buyers? 88 00:04:31,680 --> 00:04:33,640 So the way to think about this is from the customer 89 00:04:33,640 --> 00:04:35,840 perspective. The customer can go to other 90 00:04:35,840 --> 00:04:38,080 brands out there of coffee places, like you could go to a 91 00:04:38,080 --> 00:04:40,080 Dunkin' Donuts, you go to Phil's or Pete's. 92 00:04:40,280 --> 00:04:43,720 But honestly, like there is pretty high brand affinity for 93 00:04:43,720 --> 00:04:46,440 the customers. Starbucks has loyalty programs. 94 00:04:46,600 --> 00:04:48,400 They have like cool seasonal drinks. 95 00:04:48,520 --> 00:04:53,480 Customers want to buy Starbucks. Starbucks has also invested a 96 00:04:53,480 --> 00:04:56,320 lot in this area through their technology investments. 97 00:04:56,560 --> 00:04:59,120 So creating the app where you deposit money into your 98 00:04:59,120 --> 00:05:02,680 Starbucks account ahead of time kind of locks in the customer 99 00:05:02,960 --> 00:05:07,520 and sort of decreases the buyer bargaining power in some ways 100 00:05:07,520 --> 00:05:09,360 because they literally have a Ledger. 101 00:05:09,360 --> 00:05:11,760 With you, Yeah. And I guess the last part about 102 00:05:11,760 --> 00:05:15,840 Starbucks is that it was one of the bigger names to create a 103 00:05:15,880 --> 00:05:18,400 third space. And now there's like so many 104 00:05:18,400 --> 00:05:20,720 other third spaces. But Starbucks is really known 105 00:05:20,720 --> 00:05:23,800 for being like that place away from home where you can hang 106 00:05:23,800 --> 00:05:25,280 out. You bring a laptop and meet up 107 00:05:25,280 --> 00:05:27,960 with people. So in the customer's mind, like 108 00:05:27,960 --> 00:05:30,120 it's still like, let's meet up at Starbucks. 109 00:05:30,560 --> 00:05:32,800 Yeah, it's ingrained after having been in your sort of 110 00:05:32,800 --> 00:05:36,280 routine and your go to 3rd place for so many years, ever since 111 00:05:36,280 --> 00:05:38,440 for us, since high school or middle school, even middle. 112 00:05:38,440 --> 00:05:41,000 School. Not my caramel, My iced caramel 113 00:05:41,000 --> 00:05:43,000 macchiato. I guess it was the ultimate 114 00:05:43,000 --> 00:05:45,680 tree. It was so the ultimate sweet 115 00:05:45,680 --> 00:05:47,960 treat. Yes, before we knew about 116 00:05:47,960 --> 00:05:51,200 calories. Before I cared about calories 117 00:05:51,800 --> 00:05:56,640 and and the effects of caffeine on stunting my height as a 13 118 00:05:56,640 --> 00:05:58,920 year old in middle school. But I love that ice caramel 119 00:05:58,920 --> 00:06:00,360 macchiato. I felt like a queen. 120 00:06:00,360 --> 00:06:02,960 Drinking that, but we digress back. 121 00:06:03,280 --> 00:06:04,960 Back to the lesson. Back to the lesson. 122 00:06:04,960 --> 00:06:08,400 OK, so the. 4th force to talk about is the threat of 123 00:06:08,400 --> 00:06:09,480 substitutes. Yes. 124 00:06:09,480 --> 00:06:12,720 So if you think about coffee as a category, there are a lot of 125 00:06:12,720 --> 00:06:14,440 substitutes. You can make coffee at home, you 126 00:06:14,440 --> 00:06:15,960 can get coffee in the office, etcetera. 127 00:06:16,320 --> 00:06:19,240 But I think what Starbucks has done a really good job of is 128 00:06:19,240 --> 00:06:22,800 expanding into adjacent categories so that they sort of 129 00:06:23,400 --> 00:06:26,920 diversify their holdings and then decrease the threat of 130 00:06:26,920 --> 00:06:29,600 substitutes. So Starbucks also makes those 131 00:06:29,880 --> 00:06:32,520 little pods, right? Coffee pods, they make coffee 132 00:06:32,520 --> 00:06:35,320 beans you can buy, they make ground coffee. 133 00:06:35,440 --> 00:06:40,000 So they're not just a retailer of coffee in their retail 134 00:06:40,000 --> 00:06:42,200 locations only. They've done a really good job 135 00:06:42,480 --> 00:06:46,480 of sort of mitigating the the risk of substitute, the risk of 136 00:06:46,480 --> 00:06:48,920 substitutes. So I would say their risk of 137 00:06:48,920 --> 00:06:51,280 substitutes is moderate. Yeah. 138 00:06:51,520 --> 00:06:55,240 The last of Porters 5 forces is rivalry among competitors. 139 00:06:55,240 --> 00:06:57,680 So how does Starbucks line up here? 140 00:06:58,200 --> 00:07:00,920 So I mean, there's a bunch of different competitors in the 141 00:07:00,920 --> 00:07:04,160 coffee space, but Starbucks stands out because they're 142 00:07:04,160 --> 00:07:08,200 consistently delivering on the customer experience in store and 143 00:07:08,200 --> 00:07:10,640 setting itself apart with its premium pricing. 144 00:07:10,640 --> 00:07:15,320 There was an HBR piece recently on how Starbucks has gone above 145 00:07:15,320 --> 00:07:19,280 and beyond on customer service. And also, I know in the most 146 00:07:19,280 --> 00:07:22,080 recent years, there have been kind of some bad press that 147 00:07:22,080 --> 00:07:25,480 Starbucks has had recently, especially over the last like 148 00:07:25,480 --> 00:07:28,080 three years, but they've like completely jumped on top of that 149 00:07:28,320 --> 00:07:31,200 and tried to mitigate any of the bad press that they had 150 00:07:31,200 --> 00:07:33,080 recently. The press, the Starbucks like 151 00:07:33,080 --> 00:07:35,320 CEO slash president has gotten ahead of that. 152 00:07:35,320 --> 00:07:37,080 And so they're just really trying to put the customer 153 00:07:37,080 --> 00:07:39,840 service at the forefront. A Starbucks employee called the 154 00:07:39,840 --> 00:07:43,840 police on these two men who were like these two black men sitting 155 00:07:43,840 --> 00:07:47,400 in Starbucks. And then they were arrested even 156 00:07:47,400 --> 00:07:48,640 though they didn't do anything wrong. 157 00:07:48,680 --> 00:07:51,880 But then Starbucks like, really put a forward an apology and 158 00:07:51,880 --> 00:07:53,360 we're just like, how do we make this right? 159 00:07:53,560 --> 00:07:56,160 Yeah. So that is the framework of 160 00:07:56,160 --> 00:07:59,120 Porter's Five Forces. Anytime that you're thinking 161 00:07:59,120 --> 00:08:02,360 about a company, evaluating a company, you want to ask 162 00:08:02,360 --> 00:08:04,280 yourself these questions and go through this framework. 163 00:08:04,480 --> 00:08:06,760 And then that way you can understand their landscape and 164 00:08:06,760 --> 00:08:09,280 where they sit amongst all of their competitors. 165 00:08:09,600 --> 00:08:12,720 Another key HPS principle is choosing basically how you'll 166 00:08:12,720 --> 00:08:14,560 compete. So competitive positioning, 167 00:08:14,640 --> 00:08:17,400 Porter's generic strategy is basically say that companies 168 00:08:17,400 --> 00:08:21,800 pursue one of two approaches, either cost leadership or 169 00:08:21,880 --> 00:08:24,440 differentiation. So cost leadership means being 170 00:08:24,600 --> 00:08:26,920 the low cost producer. So again, the leader in the 171 00:08:26,920 --> 00:08:29,680 space is Walmart. They are all about getting the 172 00:08:29,800 --> 00:08:33,200 lowest price possible for you and doing anything they can and 173 00:08:33,200 --> 00:08:37,640 then also scaling back on other amenities so that they can 174 00:08:37,640 --> 00:08:40,480 always get you the lowest price. And that works for Walmart 175 00:08:40,480 --> 00:08:44,080 because that plays into like they're offering people go to 176 00:08:44,080 --> 00:08:46,840 Walmart for the cheapest. Like their logo is like everyday 177 00:08:46,840 --> 00:08:49,200 savings, right? That's their core value. 178 00:08:49,200 --> 00:08:53,040 Yeah, exactly. Versus differentiation means 179 00:08:53,040 --> 00:08:55,920 offering something that is valuable to the customer that 180 00:08:55,920 --> 00:08:58,840 might be at a premium. So thinking about cost 181 00:08:58,840 --> 00:09:01,480 leadership and differentiation, which one do you think Starbucks 182 00:09:01,480 --> 00:09:07,600 falls into answer in 321 Differentiation, differentiation 183 00:09:07,600 --> 00:09:11,160 situation. So Starbucks offers more premium 184 00:09:11,160 --> 00:09:13,840 priced coffee and also because of the things that we just named 185 00:09:13,840 --> 00:09:17,680 before, like their focus on 3rd spaces, their focus on customer 186 00:09:17,680 --> 00:09:20,760 service, they try to differentiate by giving you a 187 00:09:20,760 --> 00:09:23,760 better experience than just, you know, the lowest, cheapest 188 00:09:23,760 --> 00:09:25,600 experience. Yeah, the example that comes to 189 00:09:25,600 --> 00:09:28,280 mind for me is the writing the names on the cups, right. 190 00:09:28,280 --> 00:09:33,480 That is one extra step in there. Yeah, it's like an extra step in 191 00:09:33,480 --> 00:09:39,560 their operations that honestly is not really necessary for a 192 00:09:39,560 --> 00:09:43,960 generic experience, but it's caused so many it it means a lot 193 00:09:43,960 --> 00:09:46,200 to people, I think, to feel personalized. 194 00:09:46,200 --> 00:09:48,520 And also it causes some funny memes. 195 00:09:48,520 --> 00:09:51,320 Yeah, it's actually paid off in spades for them, I think. 196 00:09:51,320 --> 00:09:53,720 They've stopped like writing. I don't know if you've been to a 197 00:09:53,720 --> 00:09:55,800 Starbucks recently, but now they're like printing, printing 198 00:09:55,800 --> 00:09:58,920 it out like the names. Yeah, sometimes they still write 199 00:09:58,920 --> 00:09:59,600 it. Maybe in my? 200 00:09:59,600 --> 00:10:01,720 Online orders, they just print it out. 201 00:10:02,760 --> 00:10:05,720 But then I think recently there's been a mandate. 202 00:10:05,720 --> 00:10:07,680 I saw this online. There's an article where like 203 00:10:08,080 --> 00:10:11,840 the employees of Starbucks were asked to like, write more 204 00:10:11,840 --> 00:10:14,320 personalized messages on the cups. 205 00:10:14,400 --> 00:10:17,320 Exactly. I saw someone, someone I I know 206 00:10:17,320 --> 00:10:20,640 wrote like I love you so mucha someone or someone received a 207 00:10:20,640 --> 00:10:23,240 cup that said I love you so mucha and she actually posted it 208 00:10:23,240 --> 00:10:25,320 on her Instagram. She's like oh this totally made 209 00:10:25,320 --> 00:10:26,280 my day. Yeah. 210 00:10:26,360 --> 00:10:30,200 I mean, that's just one example of differentiation, a high, high 211 00:10:30,200 --> 00:10:32,480 touch. So the one thing you can take 212 00:10:32,480 --> 00:10:35,120 away from this lesson is that you can't be the cheapest, the 213 00:10:35,120 --> 00:10:37,640 best and the highest quality all at the same time. 214 00:10:37,640 --> 00:10:40,720 Just like Starbucks, they chose to be higher quality and more 215 00:10:40,720 --> 00:10:42,680 expensive. And one example that comes to 216 00:10:42,680 --> 00:10:45,240 mind for us is Sisters Matcha, right? 217 00:10:45,240 --> 00:10:49,520 Sisters Matcha, which is our company is a ultra premium 218 00:10:49,840 --> 00:10:53,920 matcha brand and it's ultra premium product. 219 00:10:54,200 --> 00:10:57,360 So even if we wanted to offer it for less, we just couldn't 220 00:10:57,360 --> 00:11:01,440 because of our supplier cost and the fact that the matcha that we 221 00:11:01,440 --> 00:11:05,800 provide is the cultivars called Akumadori, which only makes up 222 00:11:05,800 --> 00:11:08,520 2% of all of the matcha produced in Japan. 223 00:11:08,680 --> 00:11:11,360 So by definition, it is very rare. 224 00:11:11,360 --> 00:11:14,800 It's very hard to cultivate. It has to be hand picked. 225 00:11:14,800 --> 00:11:18,040 Like all of these different reasons contribute to the fact 226 00:11:18,040 --> 00:11:21,440 that it's a premium product. So for us, we went the way of 227 00:11:21,440 --> 00:11:24,280 differentiation as opposed to cost. 228 00:11:24,400 --> 00:11:26,360 Yeah. Which makes sense for like the 229 00:11:26,360 --> 00:11:30,400 stuff like who we are as well. Yeah, we enjoy nicer stuff. 230 00:11:30,400 --> 00:11:33,640 And we also like matcha, like when we're drinking ceremonial 231 00:11:33,640 --> 00:11:36,320 grade first harvest matcha. Like you want it to be the good 232 00:11:36,320 --> 00:11:38,560 stuff that you're putting into your body, like. 233 00:11:38,560 --> 00:11:40,320 Exactly. So for us, it wouldn't make 234 00:11:40,320 --> 00:11:43,440 sense to start a brand that is oriented on cost leadership 235 00:11:43,440 --> 00:11:46,640 because that doesn't align with our own personal brand or our 236 00:11:46,640 --> 00:11:50,640 own values for something that you are basically consuming 237 00:11:50,640 --> 00:11:53,160 every day and putting into your body and that's meant to help 238 00:11:53,160 --> 00:11:55,040 you and improve your health. Very true. 239 00:11:55,800 --> 00:12:01,120 And also, it's just beautiful. And it tastes so freaking good. 240 00:12:02,040 --> 00:12:04,640 But yeah, so these are things that like this is just another 241 00:12:04,640 --> 00:12:06,760 example for you guys to see. Like Starbucks is obviously a 242 00:12:06,760 --> 00:12:09,240 huge behemoth, but these are things that we've thought about 243 00:12:09,400 --> 00:12:13,040 when creating our own company, which is very, very small and is 244 00:12:13,040 --> 00:12:14,320 kind of a start. Yeah. 245 00:12:14,400 --> 00:12:18,560 And also just like breaking into the macho world, like we were 246 00:12:18,560 --> 00:12:22,440 asking these questions of ourselves to each other, of our 247 00:12:22,440 --> 00:12:25,240 brand and where do we want to sit and making these very 248 00:12:25,240 --> 00:12:28,760 intentional decisions so that, you know, we can be successful. 249 00:12:29,560 --> 00:12:32,360 So that concludes our mini lesson on Porter's five forces. 250 00:12:32,520 --> 00:12:34,720 Next, we're going to be talking about marketing. 251 00:12:34,840 --> 00:12:39,280 One of the first big concepts for marketing at HBS is STP, 252 00:12:39,480 --> 00:12:41,840 segmenting, targeting, and positioning. 253 00:12:42,160 --> 00:12:45,440 STP is all about identifying specific customer groups, 254 00:12:45,720 --> 00:12:48,200 choosing the right customer group for you, and then crafting 255 00:12:48,200 --> 00:12:51,160 a message for that customer group specifically and then 256 00:12:51,160 --> 00:12:53,680 making sure it sticks. So I think that all sounds 257 00:12:53,680 --> 00:12:56,680 pretty straightforward and simple, but it's the backbone of 258 00:12:56,680 --> 00:12:59,880 essentially any marketing campaign in any marketing go to 259 00:12:59,880 --> 00:13:01,120 market force. OK. 260 00:13:01,120 --> 00:13:03,080 Love that. One of the examples that we're 261 00:13:03,080 --> 00:13:06,680 going to use in our discussion and our mini case study is Warby 262 00:13:06,680 --> 00:13:11,120 Parker, which is one of the most recent big, big successes in the 263 00:13:11,120 --> 00:13:14,640 direct to consumer D to C world. Yeah, so Warby Parker actually 264 00:13:14,640 --> 00:13:16,760 is a really good example of a company that came in and 265 00:13:16,760 --> 00:13:20,800 disrupted a massive marketplace that was run by 1 behemoth, 266 00:13:20,800 --> 00:13:24,560 essentially Luxottica. So Luxottica was accounting for 267 00:13:24,560 --> 00:13:28,560 like 80 plus almost 90% of the eyewear market, the obstacle 268 00:13:28,560 --> 00:13:31,960 eyewear market glasses and they basically any brand you could 269 00:13:31,960 --> 00:13:34,120 think of was produced by Luxottica. 270 00:13:34,120 --> 00:13:35,680 So they were essentially a monopoly. 271 00:13:35,680 --> 00:13:38,320 Which is crazy, by the way, if you guys don't know Luxottica, 272 00:13:38,320 --> 00:13:43,800 like look it up like they own like Ray Bans they own like all 273 00:13:43,800 --> 00:13:45,200 the big names. You're like, oh, I thought Ray 274 00:13:45,200 --> 00:13:47,360 Ban was itself. Nope, it's owned by this like 275 00:13:47,360 --> 00:13:49,840 one company. And if you guys remember buying 276 00:13:49,840 --> 00:13:53,360 glasses, optical glasses in the 90s or the 2000s, it was a 277 00:13:53,360 --> 00:13:55,280 really big deal. Like you would pick out a pair 278 00:13:55,280 --> 00:13:58,280 of glasses, you would get them made and it was always 300 plus 279 00:13:58,280 --> 00:14:01,680 dollars if you wanted anything that was remotely cute. 280 00:14:02,000 --> 00:14:05,040 Yeah, it's a it's a really expensive and so Warby Parker 281 00:14:05,040 --> 00:14:08,000 came in, they like completely shook up the model, their deed 282 00:14:08,000 --> 00:14:10,720 to C and mostly like started online. 283 00:14:11,000 --> 00:14:13,520 So they started with their like try on phase. 284 00:14:13,520 --> 00:14:15,200 You can try on a bunch of glasses. 285 00:14:15,200 --> 00:14:18,000 They would mail it to you. It was also much cheaper than 286 00:14:18,000 --> 00:14:20,880 what you would get originally with the other model. 287 00:14:21,320 --> 00:14:23,280 OK, so good summary. So let's talk about how they 288 00:14:23,280 --> 00:14:25,240 used STP to break into this market. 289 00:14:25,640 --> 00:14:28,680 So the first part is segmenting. So what they did was they looked 290 00:14:28,680 --> 00:14:31,160 at the market and they said, OK, there are actually multiple 291 00:14:31,160 --> 00:14:33,560 different types of buyers. First for glasses, right? 292 00:14:33,720 --> 00:14:36,080 There are people who are super high end and they want really, 293 00:14:36,080 --> 00:14:38,520 really fancy glasses. Maybe that's not really us 294 00:14:38,520 --> 00:14:40,560 because they just want brand names. 295 00:14:40,560 --> 00:14:46,440 They want Prada, Versace, I want Gucci, I want product anyway. 296 00:14:46,720 --> 00:14:50,040 And then there's another market which is cost conscious. 297 00:14:50,240 --> 00:14:53,600 So people who just want to the lowest possible price, right? 298 00:14:53,600 --> 00:14:54,920 Kind of like what we talked about before. 299 00:14:55,280 --> 00:14:58,840 And then they identified 1/3 Market, which was essentially 300 00:14:58,840 --> 00:15:02,720 millennials, people who wanted something that was trendy and 301 00:15:02,720 --> 00:15:06,560 still looked good, but not necessarily didn't necessarily 302 00:15:06,560 --> 00:15:09,560 have to be the specific brand name. 303 00:15:09,880 --> 00:15:12,920 Right, so the T in STP is targeting. 304 00:15:13,000 --> 00:15:16,320 So after they identified these different segments, they decided 305 00:15:16,320 --> 00:15:18,600 which segment to actually target. 306 00:15:18,600 --> 00:15:20,200 You can't do all of them really well. 307 00:15:20,200 --> 00:15:22,800 In fact, if you try that, you're probably going to do a pretty 308 00:15:22,800 --> 00:15:25,000 bad job. You should be very focused on 309 00:15:25,000 --> 00:15:27,400 which segment you target. And so then they ended up 310 00:15:27,520 --> 00:15:30,760 choosing the third segment, which is the cost conscious 311 00:15:30,760 --> 00:15:33,400 millennials who want something cute, but something not too 312 00:15:33,400 --> 00:15:36,320 expensive. And so then Warby Parker, after 313 00:15:36,320 --> 00:15:39,240 they chose their segment, they basically created their company 314 00:15:39,400 --> 00:15:42,880 around this target segment. And basically what does this 315 00:15:42,880 --> 00:15:45,800 target segment care about and how can they cater to their 316 00:15:45,800 --> 00:15:47,840 needs? And so the first thing is that 317 00:15:47,840 --> 00:15:49,840 this target segment is online first. 318 00:15:49,840 --> 00:15:53,120 Like millennials are very comfortable buying things 319 00:15:53,120 --> 00:15:56,560 online, having things shipped to their house than like previous 320 00:15:56,560 --> 00:15:58,480 generations. The second thing we just 321 00:15:58,480 --> 00:16:02,520 mentioned is price and fashion. Warby Parker started around 95 322 00:16:02,520 --> 00:16:05,560 to $100 and this is a very affordable price range that 323 00:16:05,560 --> 00:16:07,400 millennials are willing to opt into. 324 00:16:07,840 --> 00:16:10,200 And the last is like social impact. 325 00:16:10,200 --> 00:16:13,200 Millennials are more conscious about the impact that they're 326 00:16:13,200 --> 00:16:16,080 leaving in this world. And Warby Parker like created a 327 00:16:16,080 --> 00:16:19,400 program knowing this where they like, you know, it's buy a pair 328 00:16:19,400 --> 00:16:21,200 of glasses, get a pair of glasses. 329 00:16:21,480 --> 00:16:25,480 And so they were able to tap into these three sentiments that 330 00:16:25,480 --> 00:16:28,600 this segment really. Cares about great description. 331 00:16:28,840 --> 00:16:32,040 So the last part of STP is Pete, which is positioning, which is 332 00:16:32,200 --> 00:16:35,320 essentially Warby Parker asking the question and answering it. 333 00:16:35,440 --> 00:16:37,480 How do we want customers to see our brand. 334 00:16:37,760 --> 00:16:40,720 So the answer to this was one, they wanted people to see their 335 00:16:40,720 --> 00:16:44,320 brand as modern, chic, and accessible. 2, they wanted 336 00:16:44,320 --> 00:16:46,960 customers to see their brand as digital first. 337 00:16:47,160 --> 00:16:50,240 So everything basically started with the website and then from 338 00:16:50,240 --> 00:16:52,360 the website you could pick which glasses you wanted to try and 339 00:16:52,360 --> 00:16:54,800 they would mail it to your house and then you can select your 340 00:16:54,800 --> 00:16:57,600 glasses from there. And then three, they also leaned 341 00:16:57,600 --> 00:17:01,640 very heavily on this sort of sustainability and helping other 342 00:17:01,640 --> 00:17:04,800 people in the world narrative, so that they really tied it that 343 00:17:04,800 --> 00:17:07,480 into pretty much all of their branding and all of their 344 00:17:07,480 --> 00:17:10,560 marketing. Yeah, another company that I 345 00:17:10,560 --> 00:17:13,280 think about that fell into this category, although it's like not 346 00:17:13,280 --> 00:17:15,800 really popular anymore, but it's like cater towards millennials 347 00:17:15,800 --> 00:17:18,599 was Tom's. If you remember those shoes like 348 00:17:19,680 --> 00:17:22,839 15 year, 1015 years ago, they were all the rage when they 349 00:17:22,839 --> 00:17:25,000 first started out. Everyone wanted a pair of Tom's, 350 00:17:25,000 --> 00:17:28,319 which is a pair of flats, a pair of canvas cloth flats. 351 00:17:28,520 --> 00:17:30,880 But the biggest part of their campaign that seared into my 352 00:17:30,880 --> 00:17:33,480 mind is that you give a pair of, you buy a pair of shoes. 353 00:17:33,480 --> 00:17:36,520 They give a pair of shoes to a child in need in a developing 354 00:17:36,520 --> 00:17:38,120 country. And so it was like really 355 00:17:38,120 --> 00:17:41,280 interesting that like 10-15 years ago, I think that's also 356 00:17:41,280 --> 00:17:45,600 when Warby Parker also started to like, there was such a huge 357 00:17:45,600 --> 00:17:48,040 focus on these companies to have a sustainability bend. 358 00:17:48,200 --> 00:17:51,200 Yeah, and it was also a very novel concept that. 359 00:17:51,200 --> 00:17:54,200 Doing good in the world? Sort of that your company would 360 00:17:54,200 --> 00:17:56,440 be have that as part of his company ethos. 361 00:17:56,480 --> 00:17:59,000 True. And so then that also, I think, 362 00:17:59,080 --> 00:18:03,720 elicited a lot of people who became brand loyalists for that 363 00:18:03,720 --> 00:18:06,640 reason, because they wanted to feel like, hey, this brand 364 00:18:06,680 --> 00:18:11,480 represents my morals, represents how I move in this world. 365 00:18:11,480 --> 00:18:13,600 Yeah, conscious consumerism, actually. 366 00:18:13,840 --> 00:18:15,440 That's so interesting. That was new at the time. 367 00:18:15,800 --> 00:18:17,320 Yeah. I think also coming out of that 368 00:18:17,320 --> 00:18:22,320 where companies were like Rothys, another shoe company 369 00:18:22,320 --> 00:18:25,040 that, you know, is like Conscious Eco, they don't have 370 00:18:25,040 --> 00:18:27,440 like a give and get program, but like they try to do recycled 371 00:18:27,440 --> 00:18:30,400 water bottle shoes, sustainability, sustainability, 372 00:18:30,400 --> 00:18:33,880 Blue Land sustainability band. So it's really interesting. 373 00:18:33,880 --> 00:18:35,720 I'm sure there's another case study out there about like the 374 00:18:35,720 --> 00:18:39,760 trickle effects of these giant companies establishing 375 00:18:39,760 --> 00:18:41,840 themselves and how people follow that trend. 376 00:18:41,840 --> 00:18:44,400 Yeah, maybe it's kind of more, it's almost like taken for 377 00:18:44,400 --> 00:18:47,960 granted now that that's sort of part of a lot of the DNA of a 378 00:18:47,960 --> 00:18:51,960 lot of companies, yeah. So now Warby Parker is valued at 379 00:18:51,960 --> 00:18:55,400 more than a billion dollars. They have so many cute little 380 00:18:55,400 --> 00:18:59,000 boutiques in like basically every major city, and they're 381 00:18:59,000 --> 00:19:01,880 doing super well. And the main conclusion from 382 00:19:01,880 --> 00:19:05,720 this discussion from STP is that you should choose a target 383 00:19:05,720 --> 00:19:09,920 segment and the hyper focused on the population in the community 384 00:19:09,920 --> 00:19:12,240 that you want to serve. Because if you're trying to 385 00:19:12,240 --> 00:19:14,680 serve everyone, you're really serving no one and you're not 386 00:19:14,680 --> 00:19:18,480 going to be doing a good job. You really need to be focused on 387 00:19:18,480 --> 00:19:20,840 your target segment. So if you're launching your own 388 00:19:20,840 --> 00:19:24,040 brand, you want to ask who specifically do I want to serve? 389 00:19:24,040 --> 00:19:26,920 And then what you do is you actually think about these 390 00:19:26,920 --> 00:19:29,960 people and then you build your entire brand and your strategy 391 00:19:29,960 --> 00:19:32,720 around their hopes, their dreams, their frustrations and 392 00:19:32,720 --> 00:19:34,520 their values. The. 393 00:19:34,520 --> 00:19:38,520 Best products that I've ever used are the ones that are like 394 00:19:39,040 --> 00:19:43,080 hyper focused on their customers and understanding them super 395 00:19:43,080 --> 00:19:46,040 deeply. All right, that concludes the 396 00:19:46,040 --> 00:19:47,960 section we're moving on. OK. 397 00:19:47,960 --> 00:19:50,320 So the next section we're going to talk about is product 398 00:19:50,320 --> 00:19:52,600 innovation. So for product development and 399 00:19:52,600 --> 00:19:55,480 innovation, between the two of us, we've worked on this for 400 00:19:55,480 --> 00:19:57,760 almost 20 years, crazy put together. 401 00:19:57,760 --> 00:20:00,200 So we could probably talk about this for 1000 hours. 402 00:20:00,760 --> 00:20:03,680 So we'll just go really, really quickly into the main take away. 403 00:20:03,680 --> 00:20:05,960 The number one thing to know about product development that 404 00:20:05,960 --> 00:20:09,200 we learned at HBS is that you can't just guess at what a 405 00:20:09,200 --> 00:20:11,840 person's problem is. You have to really very 406 00:20:11,840 --> 00:20:15,080 specifically identify the customer's problem and work to 407 00:20:15,080 --> 00:20:18,240 solve specifically that. And the example we're going to 408 00:20:18,240 --> 00:20:20,920 use is Netflix. There's actually a lot of 409 00:20:20,920 --> 00:20:23,520 Business School cases written about Netflix, yeah. 410 00:20:23,520 --> 00:20:28,680 Actually, I met Reed Hastings because he came to Stanford GSB 411 00:20:28,680 --> 00:20:31,520 last year when I was a student and he gave a speech. 412 00:20:32,200 --> 00:20:34,320 Oh, nice, yeah. And I read his book and I've 413 00:20:34,320 --> 00:20:36,440 done like a book report on on him so. 414 00:20:36,440 --> 00:20:38,360 A book report. I literally did a book report. 415 00:20:38,360 --> 00:20:39,760 How old were you? This was last. 416 00:20:39,760 --> 00:20:41,240 Year when I was a student at Stanford. 417 00:20:42,440 --> 00:20:44,120 So you're obsessed with him kind. 418 00:20:44,120 --> 00:20:45,440 Of so I'm really excited to talk about. 419 00:20:45,440 --> 00:20:46,280 This. Oh good. 420 00:20:46,600 --> 00:20:48,960 The main take away here, and it's kind of related to our 421 00:20:48,960 --> 00:20:51,720 previous section, but it's getting to know your audience 422 00:20:51,720 --> 00:20:54,280 and your customers super deeply. And we're just going to give you 423 00:20:54,280 --> 00:20:57,040 2 specific tactics on how to do that. 424 00:20:57,280 --> 00:21:00,200 And the first is user feedback and iteration. 425 00:21:00,200 --> 00:21:02,240 One way to do this is AB testing. 426 00:21:02,360 --> 00:21:07,040 Famously, Netflix ran a bunch of AB tests, meaning they ran like 427 00:21:07,080 --> 00:21:12,440 two different types of products with their customers to see 428 00:21:12,440 --> 00:21:16,560 which ones they liked better. All of this is in service of 429 00:21:16,560 --> 00:21:19,560 getting to know their customers and what their customers prefer. 430 00:21:19,760 --> 00:21:24,000 Yeah, Netflix is infamously known for always AB testing 431 00:21:24,080 --> 00:21:27,000 every single little thing. So one example that you may or 432 00:21:27,000 --> 00:21:30,880 may not notice is if you compare your Netflix account with your 433 00:21:30,880 --> 00:21:34,200 friend's Netflix account and you look at the same title that's 434 00:21:34,200 --> 00:21:39,680 being presented to you, you may have a different photo for for 435 00:21:39,680 --> 00:21:41,440 the title. You may have a different 436 00:21:41,440 --> 00:21:43,240 thumbnail. So for example, one thing I 437 00:21:43,240 --> 00:21:49,440 noticed is that I think Netflix has identified that I like 438 00:21:49,440 --> 00:21:53,160 handsome Asian men because it doesn't though, because first 439 00:21:53,160 --> 00:21:56,440 shows that for example, if there's like a movie with Henry 440 00:21:56,440 --> 00:22:00,480 Golding in it, they'll always show Henry Golding as the 441 00:22:00,520 --> 00:22:03,400 thumbnail versus for someone else, they'll show the other 442 00:22:03,400 --> 00:22:06,160 main character who's actually the main character when Henry 443 00:22:06,160 --> 00:22:08,240 Golding is more like a secondary character I. 444 00:22:08,240 --> 00:22:10,040 Want to see Henry Golding in every thumbnail? 445 00:22:10,160 --> 00:22:12,960 So they know that I'm more likely to click into this the 446 00:22:12,960 --> 00:22:16,760 movie when they're showing me Henry Golding versus the actual 447 00:22:16,760 --> 00:22:18,920 main character and not him. This is. 448 00:22:19,160 --> 00:22:22,040 My cue to promote our dating episode podcast. 449 00:22:23,240 --> 00:22:26,160 So if you guys are new to our podcast here at Tiger Sisters, 450 00:22:26,160 --> 00:22:28,880 we also talk about lots of other things outside of Henry Golding 451 00:22:28,880 --> 00:22:31,880 Miss Festival. So check out our dating 452 00:22:31,880 --> 00:22:34,160 podcasts. So the main take away from this 453 00:22:34,160 --> 00:22:37,360 section is to really understand the problem that you're trying 454 00:22:37,360 --> 00:22:40,040 to solve. Iterate like crazy and don't be 455 00:22:40,040 --> 00:22:42,920 afraid to pivot when you get new data and information. 456 00:22:44,280 --> 00:22:46,120 And test, test, test, test, test. 457 00:22:46,120 --> 00:22:49,480 Test and our last and final section in this episode is on 458 00:22:49,720 --> 00:22:51,720 finance. Here are some terms that you 459 00:22:51,720 --> 00:22:54,920 should know and also like how to not feel dumb in these 460 00:22:54,920 --> 00:22:56,320 conversations. Yeah. 461 00:22:56,320 --> 00:22:59,640 And the HBS approach to finance that they would always tell us 462 00:22:59,640 --> 00:23:03,240 over and over is not that every single student at HBS is 463 00:23:03,240 --> 00:23:05,920 supposed to graduate as some sort of financial genius and be 464 00:23:05,920 --> 00:23:09,400 able to actually run DCF models on your own all the time. 465 00:23:09,600 --> 00:23:12,520 It's actually more so that you want to graduate with the 466 00:23:12,520 --> 00:23:17,200 ability to run your own company or be a CEO somewhere and have 467 00:23:17,200 --> 00:23:20,720 conversations with the CFO and with the board where they talk 468 00:23:20,720 --> 00:23:23,160 about finance and you understand everything that they're saying. 469 00:23:23,440 --> 00:23:25,720 So that's really the goal. I actually like that approach 470 00:23:25,720 --> 00:23:29,560 because I don't personally enjoy being in the weeds of finance 471 00:23:29,560 --> 00:23:32,600 and actually putting together all the models myself, but I 472 00:23:32,600 --> 00:23:35,520 love to talk with my counterparts in the Financial 473 00:23:35,520 --> 00:23:39,280 Group about how things are going and like adjusting the 474 00:23:40,440 --> 00:23:41,760 projections and getting more money. 475 00:23:42,160 --> 00:23:45,600 I mean, but also it goes to say like if you are ACEO or a leader 476 00:23:45,600 --> 00:23:48,440 of a company, like it's not your job to be the expert. 477 00:23:48,440 --> 00:23:51,920 Like that's the CFO, that's like your right hand man or woman who 478 00:23:51,920 --> 00:23:55,600 is supposed to better understand it as the expert and like help 479 00:23:55,600 --> 00:23:57,480 you make decisions with that information. 480 00:23:57,480 --> 00:23:58,720 Right. But you need to understand what 481 00:23:58,720 --> 00:24:00,600 they're presenting to you so that you can make those 482 00:24:00,600 --> 00:24:03,720 decisions with confidence and then also represent all those 483 00:24:03,720 --> 00:24:05,840 decisions to the board. True Debt. 484 00:24:06,000 --> 00:24:08,280 So we're going to go really quickly through 5 concepts. 485 00:24:08,280 --> 00:24:10,400 The first one is revenue versus profit. 486 00:24:10,720 --> 00:24:13,160 Shree, can you start us off with revenue versus profit? 487 00:24:13,400 --> 00:24:16,320 OK, guys, this is the first concept you really need to know. 488 00:24:16,440 --> 00:24:18,360 You've heard of revenue, you've heard of profit. 489 00:24:18,520 --> 00:24:20,320 How are they different? And we're going to use the 490 00:24:20,320 --> 00:24:23,640 example of Netflix. Revenue is how much money is 491 00:24:23,640 --> 00:24:26,320 coming through the door. And with Netflix, it's basically 492 00:24:26,320 --> 00:24:30,320 like their subscription fees. Profit is what's left after all 493 00:24:30,320 --> 00:24:32,640 the bills are paid. So Netflix is a tech company. 494 00:24:32,640 --> 00:24:35,280 They probably have a lot of servers, they have employees. 495 00:24:35,280 --> 00:24:37,280 They need to pay all those costs. 496 00:24:37,600 --> 00:24:40,200 Profit is after all those costs are covered. 497 00:24:40,400 --> 00:24:43,920 This is really important because you can have billions of dollars 498 00:24:43,920 --> 00:24:45,920 of revenue. Like you can bring in a lot of 499 00:24:45,920 --> 00:24:49,720 cash, but if you have really high costs, you might still not 500 00:24:49,720 --> 00:24:52,240 be a profitable company. The next concept we're going to 501 00:24:52,240 --> 00:24:55,080 talk about is cash flow. Gene, can you explain this? 502 00:24:55,680 --> 00:24:57,720 Sure. So cash flow is essentially the 503 00:24:57,720 --> 00:24:59,880 closest item to I think your bank account. 504 00:25:00,000 --> 00:25:03,040 So if you think about Netflix, what they do is they invest 505 00:25:03,040 --> 00:25:06,080 billions of dollars upfront to actually produce the shows that 506 00:25:06,080 --> 00:25:09,680 they produce in house. So those shows are actually 507 00:25:09,680 --> 00:25:13,720 marked as a asset. So you can, it can seem like you 508 00:25:13,720 --> 00:25:17,120 actually have that money on hand in terms of your balance sheet, 509 00:25:17,640 --> 00:25:19,680 but you don't actually have the cash on hand. 510 00:25:19,840 --> 00:25:21,920 So that's why it's really important to differentiate 511 00:25:21,920 --> 00:25:24,400 between cash flow and revenue versus profit. 512 00:25:24,600 --> 00:25:26,440 Yeah. And something they say in 513 00:25:26,440 --> 00:25:28,680 Business School when they're like evaluating businesses, some 514 00:25:28,680 --> 00:25:31,920 businesses might be cash poor. They might just not have a lot 515 00:25:31,920 --> 00:25:33,120 of cash on them. Yeah. 516 00:25:33,120 --> 00:25:36,400 And then some businesses are seem very, very boring, but they 517 00:25:36,400 --> 00:25:40,200 actually throw off cash in a very recurring manner. 518 00:25:40,360 --> 00:25:43,520 And then the third concept to talk about is unit economics. 519 00:25:43,920 --> 00:25:47,200 This is a really important term to know and to understand 520 00:25:47,200 --> 00:25:49,280 because we'll get whenever you're evaluating a company, 521 00:25:49,440 --> 00:25:52,240 like it will always inevitably come up, people will ask about 522 00:25:52,240 --> 00:25:55,200 the unit economics. So the unit economics actually 523 00:25:55,200 --> 00:25:58,040 just refers to the cost per unit. 524 00:25:58,040 --> 00:26:01,400 And in this case of Netflix, it's the cost per subscriber. 525 00:26:01,480 --> 00:26:04,920 For Netflix, it's like the margin that you get per 526 00:26:04,920 --> 00:26:07,240 subscriber. So for example, each 527 00:26:07,240 --> 00:26:11,440 subscription cost $10, you get that money in. 528 00:26:11,600 --> 00:26:15,120 But then for Netflix, they have to like, create movies and TV 529 00:26:15,120 --> 00:26:18,240 shows and if they're able to like figure out each subscriber 530 00:26:18,280 --> 00:26:21,000 actually cost them $12.00, then they're like losing money. 531 00:26:21,120 --> 00:26:24,200 Yeah, it makes sense. I think also in terms of 532 00:26:24,200 --> 00:26:27,920 marketing, a lot of times people look at the cost for marketing 533 00:26:27,920 --> 00:26:30,360 versus your lifetime value of the subscriber. 534 00:26:30,680 --> 00:26:33,560 So you need to make sure that the amount you're spending to 535 00:26:33,560 --> 00:26:38,040 get each incremental subscriber or for each unit economics makes 536 00:26:38,040 --> 00:26:40,040 sense in terms of how much you think that they're worth. 537 00:26:40,040 --> 00:26:43,640 So that's actually a lot of times companies such as Netflix, 538 00:26:43,640 --> 00:26:46,720 I know for sure, actually Netflix spends a ton of time 539 00:26:46,720 --> 00:26:50,320 doing this analysis with their their hordes of data scientists. 540 00:26:50,320 --> 00:26:52,280 Yeah. And I guess for us, for Sisters 541 00:26:52,280 --> 00:26:55,760 Matcha, for our Matcha brand, something we think about is unit 542 00:26:55,760 --> 00:26:58,240 economics. So basically for our brand, the 543 00:26:58,240 --> 00:27:01,600 example is like breaking it down per customer if they're 544 00:27:02,000 --> 00:27:04,360 ostensibly if they're a first time customer, they're buying 545 00:27:04,360 --> 00:27:06,960 one. How much does it cost for us to 546 00:27:08,000 --> 00:27:10,840 you know make the can per can? What is it? 547 00:27:10,840 --> 00:27:13,760 If we're shipping all these cans, just bring it down to the 548 00:27:13,760 --> 00:27:16,240 most basic unit of just one can. Well, per. 549 00:27:16,240 --> 00:27:20,400 Can per can exactly, yeah. So the 4th finance term you 550 00:27:20,400 --> 00:27:23,320 should know is forecast and. Runway. 551 00:27:23,520 --> 00:27:24,600 Yeah. So this one's pretty very 552 00:27:24,600 --> 00:27:26,040 simple. Runway is basically how much 553 00:27:26,040 --> 00:27:29,000 money do you have left if you continue to spend at your 554 00:27:29,000 --> 00:27:31,240 existing burn rate. So if you're spending for 555 00:27:31,240 --> 00:27:34,560 example, $100,000 per year, how much money do you have? 556 00:27:34,560 --> 00:27:37,240 If you only have $200,000 a year, your runway is 2 years. 557 00:27:37,680 --> 00:27:39,200 After that you will run out of money. 558 00:27:39,520 --> 00:27:42,200 So as ACEO, you have to always be looking out for your run rate 559 00:27:42,200 --> 00:27:43,800 to make sure that you can stay afloat. 560 00:27:44,280 --> 00:27:46,920 And the last group of finance terms you need to know are 561 00:27:46,920 --> 00:27:49,880 valuation metrics. These are terms that you've 562 00:27:49,880 --> 00:27:52,440 probably heard about or read about somewhere, maybe the Wall 563 00:27:52,440 --> 00:27:56,320 Street Journal, for example, price to earnings ratio or EV to 564 00:27:56,320 --> 00:27:57,800 EBITDA. That's enterprise value to 565 00:27:57,880 --> 00:27:59,520 EBITDA. These are all things that 566 00:27:59,520 --> 00:28:03,400 essentially are projecting what the worth or value of your 567 00:28:03,400 --> 00:28:05,360 company is. Don't be afraid of these 568 00:28:05,360 --> 00:28:08,320 acronyms because it's just a way for investors to express the 569 00:28:08,320 --> 00:28:11,560 value of your company. And the actual number itself 570 00:28:11,560 --> 00:28:14,960 doesn't really mean anything unless you look at it within the 571 00:28:14,960 --> 00:28:17,320 context of what your category is. 572 00:28:17,560 --> 00:28:21,440 So if you look at a company and you say, oh, they have a price 573 00:28:21,440 --> 00:28:25,960 to earnings of 20, that can mean that they're doing amazingly or 574 00:28:25,960 --> 00:28:28,920 can actually mean that they're really below the bar depending 575 00:28:28,920 --> 00:28:31,800 on what category they're in. So it's like tech versus, you 576 00:28:31,800 --> 00:28:34,920 know, industrials, for example. So we can talk about this for 577 00:28:34,920 --> 00:28:37,000 way, way, way more, but we're not going to. 578 00:28:37,000 --> 00:28:38,160 We're just going to leave it at that. 579 00:28:38,160 --> 00:28:40,960 And let us know if you have any questions in the comments and if 580 00:28:40,960 --> 00:28:42,520 you want us to do a longer episode on this. 581 00:28:43,040 --> 00:28:46,240 So that wraps up the HBS hard skills you need to know. 582 00:28:46,240 --> 00:28:49,120 There's so much more we can talk about the soft skills on 583 00:28:49,120 --> 00:28:53,120 leadership and networking, which is honestly what HBS and 584 00:28:53,120 --> 00:28:56,320 Business School is known for. Thank you guys so much for 585 00:28:56,320 --> 00:28:58,920 tuning into this episode. Please leave comments about what 586 00:28:58,920 --> 00:29:01,320 you want to learn more about and we'll create a follow up episode 587 00:29:01,320 --> 00:29:04,040 on that. And Please remember to like, 588 00:29:04,040 --> 00:29:07,800 comment and subscribe and please leave five star reviews on 589 00:29:07,800 --> 00:29:12,120 Spotify and also Apple podcast. It helps us so much and it keeps 590 00:29:12,120 --> 00:29:14,240 our podcast alive. If you enjoyed this podcast 591 00:29:14,240 --> 00:29:17,040 episode, please share it with someone who might find it 592 00:29:17,040 --> 00:29:20,000 helpful and leave any questions you guys have in the comments. 593 00:29:20,000 --> 00:29:23,960 This is honestly one of our first like explainer episodes 594 00:29:24,040 --> 00:29:26,360 and if you want to see more stuff like this, please let us 595 00:29:26,360 --> 00:29:29,200 know and give us suggestions. We read every single comment. 596 00:29:29,600 --> 00:29:30,960 Thanks for tuning in. Bye. 597 00:29:32,040 --> 00:29:34,600 Hey everyone, quick break to share something special. 598 00:29:34,720 --> 00:29:37,400 Sisters Matcha. 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