This is everything we learned at Harvard Business School in 30
minutes. I'm Cherie, I'm Jean, and we're
the Tiger sisters. Welcome to Season 4 of the Tiger
Sisters Podcast. Yeah, so if you're new to this
channel, Gina's my older sister. She went to Harvard Business
School. She's 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
and biatch. 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 Zynga, the gaming
company, and most recently at Snapchat as head of product for
augmented reality monetization. And she 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 4 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 MBA S 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
sistersmatcha.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 they strive to differentiate themselves.
And where where they shine. Yeah, so at HBS, 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. Porter's five forces was
actually invented at HBS, so we bring it up all the time.
Porter's five forces are as follows.
Threat of new entrants, bargaining power of suppliers,
bargaining power of buyers, threat 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 Business School company example.
So let's start with Starbucks and threat of new entrants.
So the way to think about the threat of new entrants is that
from Starbucks perspective, one of the reasons why they're super
successful is because it's really hard to start your own
coffee company and go against big people like Starbucks.
Starbucks already is a pretty massive company, so they spent 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 in 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 threat of new entrance for Starbucks is
actually pretty low, yes. So the second is bargaining
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. 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
power and buyers. Also Costco.
Those are some of the other ones that get brought up a lot.
Yeah. The big names.
OK, Sheree, 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 a
Dunkin' Donuts, you go to Phil's or Pete's.
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
and sort of decreases the buyer bargaining power in some ways
because 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 and meet up
with people. So in the customer's mind, like
it's still like, let's meet up at Starbucks.
Yeah, it's ingrained after having been in your sort of
routine and your go to 3rd place for so many years, ever since
for us, since high school or middle school, even middle.
School. Not my caramel, My iced caramel
macchiato. I guess 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 like a queen.
Drinking that, but we digress back.
Back to the lesson. Back to the lesson.
OK, so the. 4th 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, etcetera.
But I think what Starbucks has done a really good job of is
expanding into adjacent categories so that they sort of
diversify their holdings and then decrease the threat of
substitutes. So Starbucks also makes those
little pods, right? Coffee pods, they make coffee
beans 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 the risk of substitute, the risk of
substitutes. So I would say their risk of
substitutes is moderate. Yeah.
The last of Porters 5 forces is rivalry among competitors.
So how does Starbucks 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, especially over the last like
three years, but they've like completely jumped on top of that
and tried to mitigate any of the bad press that they had
recently. The press, the Starbucks like
CEO slash 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 the
police on these two men who were like these two black men sitting
in Starbucks. And then they were arrested 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 strategy is basically say that companies
pursue one of two approaches, either cost leadership or
differentiation. So cost leadership means being
the low cost 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 amenities so that they can
always get you the lowest price. And that works for Walmart
because that plays into like they're 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 differentiation, which one do you think Starbucks
falls into answer in 321 Differentiation, differentiation
situation. So Starbucks offers more premium
priced coffee and also because of the things that we just named
before, like their focus on 3rd spaces, their focus on customer
service, they try to differentiate by giving you a
better experience than just, you know, 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 there. Yeah, it's like an extra step in
their 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, 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, sometimes they still write
it. Maybe in my?
Online orders, they just print it out.
But then I think recently there's been a mandate.
I saw this online. There's an article where like
the employees of Starbucks were asked to like, write more
personalized messages on the cups.
Exactly. I saw someone, someone I I know
wrote like I love you so mucha someone or someone received a
cup that said I love you so mucha and she actually posted it
on her Instagram. She's like oh this totally made
my day. Yeah.
I mean, that's just one example of differentiation, 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 Sisters 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 the cultivars called Akumadori, 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 hand picked.
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. Yeah, 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 or 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 it tastes so freaking good.
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 start. Yeah.
And also just like breaking into the macho 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 Porter's five 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. OK.
Love that. One of the examples that we're
going to use in our discussion and our mini case study is Warby
Parker, which is one of the most recent big, big successes in the
direct to consumer D to C world. Yeah, so Warby Parker actually
is a really good example of a company that came in and
disrupted a massive marketplace that was run by 1 behemoth,
essentially Luxottica. So Luxottica was accounting for
like 80 plus almost 90% of the eyewear market, the obstacle
eyewear market glasses and they basically any brand you could
think of was produced by Luxottica.
So they were essentially a monopoly.
Which is crazy, by the way, if you guys don't know Luxottica,
like look it up like they own like Ray Bans they own like all
the big names. You're like, oh, I thought Ray
Ban 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
dollars if you wanted anything that was remotely cute.
Yeah, it's a it's a really expensive and so Warby Parker
came in, they like completely shook up the model, their deed
to C 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.
OK, 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, OK, there are actually multiple
different types of buyers. First 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, Versace, I want Gucci, I want product 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 1/3 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 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 Warby Parker like created a
program knowing this where they like, you know, it's buy a pair
of glasses, get a pair of glasses.
And so they were able to tap into these three sentiments that
this segment really. Cares about great description.
So the last part of STP is Pete, which is positioning, which is
essentially Warby 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. 2, 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 and
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 sustainability and helping other
people in the world narrative, so that they really tied it that
into pretty much all of their branding and all of 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, 1015 years ago, they were all the rage when they
first started out. Everyone wanted a pair of Tom's,
which is 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 like really
interesting that like 10-15 years ago, I think that's also
when Warby Parker also started to 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 his company ethos.
True. And so then that also, I think,
elicited 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
where companies were like Rothys, another shoe company
that, you know, is 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,
Blue Land sustainability band. 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 the hyper focused on the population in 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 and your strategy
around their hopes, their dreams, their frustrations and
their values. The.
Best products that I've ever used are the ones that are like
hyper focused on their customers and understanding them super
deeply. All right, that concludes the
section we're moving on. OK.
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 1000 hours.
So we'll just go really, really quickly into the main take away.
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, I met Reed Hastings because he came to Stanford GSB
last year when I was a student and he 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 take away 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
2 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 ones 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 photo for for
the title. You may have a different
thumbnail. So for example, one thing I
noticed is that I think Netflix has identified that I like
handsome Asian men because it doesn't though, because first
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 and not him. 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 outside of Henry Golding
Miss Festival. So check out our dating
podcasts. So the main take away 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
projections and getting more money.
I mean, but also it goes to say like if you are ACEO 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 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 Debt.
So we're going to go really quickly through 5 concepts.
The first one is revenue versus profit.
Shree, can you start us off with revenue versus profit?
OK, 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. Gene, 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 manner.
And then the third concept to talk about is unit economics.
This is a really important term to know and to understand
because we'll get 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 $12.00, then they're like losing money.
Yeah, it makes sense. I think also in terms of
marketing, a lot of times people look at 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 for 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, 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
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 4th finance term you
should know is forecast and. Runway.
Yeah. So this one's pretty very
simple. Runway is basically how much
money do you have left if you continue to 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 ACEO, 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 the Wall
Street Journal, for example, price to earnings ratio or EV to
EBITDA. That's enterprise value to
EBITDA. 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 can mean that they're doing amazingly or
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.
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. 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
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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.
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of ceremonial grade single estate single cultivar matcha
straight from the family farm Sheree worked on in Japan.
It's pure, authentic, and crafted with intention.
Head to Sisters matcha.com to grab yours before it sells out.
Make Matcha your daily ritual for lasting energy and focus.