16 Dec 2013 Research & Ideas

DO: Making a Michelin-Starred Restaurant

Affordable
Under the leadership of Chef
Davide Oldani, the Italian
restaurant D'O balances
Michelin-star-level quality with
affordable prices. In the following
story and video, Gary P. Pisano
explains how the chef-owner does
it.

by Carmen Nobel (story) and

Joanie Tobin (video)
For restaurateurs, receiving a
Michelin star can be a mixed
blessing. Certainly it's a rare and
celebrated honorthe French
company bestows its one-, two-,
and three-star ratings only to a
select few restaurants worldwide.
However, a star begets
expectations of quality. To avoid
the disgrace of losing the rating, a
starred restaurant often invests
more money than ever on
high-quality staff, flatware, wine,
and ingredients. The result: higher
prices. Dinner tabs in France or
Italy often skyrocket to more than
120? per person, for instance.
Frugal patrons look for affordable
alternatives, and the restaurant,
failing to fill seats nightly, starts
operating at a loss.

But then there's D'O, a restaurant in

Cornaredo, Italy, that opened in
2003 and received a Michelin star
only one year later. Under the
leadership of chef and owner
Davide Oldani, the profitable
35-seat eatery serves dinners at
around 45? to 50? per head and
lunches for half that. D'O not only
is filled to capacity year-round, but
there's an 18-month waiting list to
dine there. Understandably, this
piqued the interest of a veteran
organizational strategy scholar.
Click Here
"Davide Oldani completely
changed the cost/quality tradeoff
for a Michelin-starred restaurant,"
said Gary P. Pisano, the Harry E.
Figgie, Jr. Professor of Business
Administration at Harvard
Business School and the lead
author of the HBS case study Chef
Davide Oldani and Ristorante D'O.
"And I'm always interested in how
leaders use operational innovation
to manage the tradeoff between
cost and quality. It's an issue you
find in every business, whether
you're a chef or an executive at
Mercedes or BMW or Apple."
In November, Oldani visited
Pisano's second-year Operations
Strategy class to discuss the case,

COPYRIGHT 2013 PRESIDENT AND FELLOWS OF HARVARD COLLEGE

which details the success of the

10-year-old D'O and poses
questions about Oldani's plans for
growth. Both the chef and the
professor met with Harvard
Business School Working
Knowledge to talk about the secrets
to Oldani's success and his
potential plans for the future.
(Oldani spoke in Italian, and
Pisano's wife, who is bilingual,
acted as interpreter.)

STAFFING FOR PEAK

OCCUPANCY
For many restaurants, some nights
of the week attract more customers
than others. A bistro packed with
customers on the weekend might
be half empty on a Tuesday. For
Michelin-star restaurants, that
utilization curve poses a staffing
problem.

"Following the season is

the most important thing to
do in the applied economics
of a restaurant" Davide
Oldani
"The people who work at this kind
of restaurant are not part-timers
coming in for four hours a night or

HARVARD BUSINESS SCHOOL | WORKING KNOWLEDGE | HBSWK.HBS.EDU

only on weekends," Pisano

explained. "These are
professionals. The waiters who
work at a Michelin-starred
restaurant are professionals. The
cooks are professionals. These are
40-hour-a-week jobs, and you hire
them for a full week. If you're a
Michelin-starred restaurant you
have to staff for the peak. You
have to staff for the Thursday and
Friday night load. And as a result
you carry a very high cost."
Michelin-one-star-rated restaurants
in Europe have an average of 36
employees on the payroll,
according to the case. D'O keeps a
lean crew of 14 by multitasking.
Oldani does not employ any
professional waiters. Rather, the
chefs at D'O take turns waiting
tables. (In fact, when Pisano first
dined there, Oldani was his waiter.)
This leads to a significant
reduction in labor costs, even while
allowing Oldani to pay his staff
higher-than-average wages. Still,
the chef insists that the strategy is
less about finances than about
customer relations.
"You can't fully explain a dish that
you haven't prepared yourself,"
Oldani said. "When a cook
explains a dish, he can explain it
very well because he made it. He
doesn't explain what he heard
about a dish, he explains what he
made."

FOLLOWING THE
SEASONS
Oldani espouses the philosophy of
"POP cuisine," which aims for
accessibility to a broad audience, in
terms of both taste and cost. He
maintains that he keeps food costs

down and flavors bright simply by

buying ingredients only when they
are in season. "Ingredients are less
expensive and of higher quality
when they are in season," Oldani
said. "Following the season is the
most important thing to do in the
applied economics of a restaurant."
The chef also is fervent about not
wasting food. The case includes a
lengthy list he keeps in his office at
D'O, detailing the edible portions
of some 70 ingredients. A sea bass
has an "edible share" of 47 percent,
compared to 60 percent of a hake,
for example. A fig: 90 percent. A
strawberry: 99 percent. A lemon:
26 percent (juice) + 2 percent
(grated lemon peelonly the
yellow part, of course).
Table settings receive similar
consideration, both sensory and
economic. On the sensory side: He
has designed several eating
utensils, including an espresso
spoon that sports a hole in the
middle so as not to break up the
continuity of the crema on top. On
the economic side: "He chooses
glasses based on breakage costs,"
Pisano said.

"You talk to this guy and

you think he's a production
engineer" Gary Pisano
The precise attention to detail is
also key to creating a menu that the
chef describes as harmonious.
"The more harmony in the menu,
the better the cook can work,"
Oldani said. "To get to that
harmony, you must avoid
repetition on the menu. You cannot
repeat the same cooking styles or

COPYRIGHT 2013 PRESIDENT AND FELLOWS OF HARVARD COLLEGE

the same sauces. Not two red meats

or two white meats. You cannot
have two carbs. A main dish of
pasta can't be followed by a dessert
made mostly of flour. This is
important for modern cooking. We
have 22 dishes on la carta, and in
every dish there is not one
ingredient that's identical to
another. They're all different."
Pisano believes that managers and
management scholars alike can
learn an important lesson in
Oldani's ability to marry creativity
with intense, practical attention to
detail.
"A lot of times we get this
ridiculous false dichotomy made in
management: that there are creative
people, and then there are
disciplined people," Pisano said.
"Well, the best chefs in the world
are both. They're both incredibly
creative and incredibly disciplined.
And this challenges the idea that it
has to be one or the other. In the
innovation literature, it's always
about creativity versus discipline.
Well Oldani shows that it's not
versus, it's and. You talk to this
guy and you think he's a
production engineer."

REMEMBERING
PASSION
As a guest in Pisano's class, Oldani
listened as students discussed his
historic success and his
possibilities for expansion. They
differed in opinion about whether
he should open another D'O or a
new, more accessible venture that
took POP to a new level. Some
argued that he should stick with a
successful brand, letting one of his
trained chefs take the helm at a

HARVARD BUSINESS SCHOOL | WORKING KNOWLEDGE | HBSWK.HBS.EDU

new D'O location. Others thought a

new venture with a name like
"POP by D'O" would be a good
complement to the flagship
restaurant. But they agreed in terms
of the nature of their arguments,
which, understandably, focused on
finances. (One student crunched
the numbers and recommended that
Oldani increase D'O's menu prices
by 18 percent. Oldani demurred,
citing Italy's recent economic woes
and their effect on Italian wallets.)
Afterward, Oldani told the students
that they had forgotten to mention
the factor of passion. "Everything I

do, I do it because I want to do it,"

he said. "Passion has to come first.
It leads you to all the things that
lead to success."
Asked what he actually plans to do
next, Oldani gave an answer that
may help to explain why D'O has
such a low turnover rate.
(According to the case, only three
employees have left since the
restaurant's opening 10 years ago,
and all three happened to be hired
as temps.)
"I'll definitely start another
business," Oldani told Working

COPYRIGHT 2013 PRESIDENT AND FELLOWS OF HARVARD COLLEGE

Knowledge. "I want to see what my

team says. And depending on what
we all decide to do, we'll determine
what kind of business to open. I
want to help the team grow and
learn. As the team manager, I want
to encourage them to get involved
in decisions."

About the author

Carmen Nobel is senior editor of
Harvard Business School Working
Knowledge.