Tag Archives: Harvard Business Review

No kaizen here: Benihana of Tokyo case study

29 Jan

The heyday of the Benihana of Tokyo restaurant chain was the late 1970s and early 1980s. Back then, Benihana was glamorous, exotic and chi-chi. How do I know? I grew up in San Francisco, and precisely recall my experiences at the original location in that city, the chain’s fourth restaurant. The distinctive, finely crafted exterior. The tiled eaves. Its semi-cryptic Asian sign. Its heavy wooden front door. The dim, alluring interior. The private dining rooms with sliding Shoji screens. During its glory days, the era when this case study was written, Benihana was really something. I’ll never forget it.

You can still see a few telltale architectural details by searching for 740 Taylor Street on Google Maps Street View. The building was long ago converted into classrooms for the Academy of Art University, but it’s still distinctly Japonesque. The current Benihana in San Francisco was moved several miles to the West, to Japantown. I’ve never been to the newer version, but I’m fairly certain this newer outpost was not assembled by an imported crew of Japanese carpenters reassembling authentic materials from Japan.
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I have several memories of eating at Benihana in my late pre-adulthood, circa the early ‘80s. Some involved Japanese businessmen. My father worked in the computer industry, and commuted to a suburb called Santa Clara – it wasn’t even called Silicon Valley then – and occasionally we socialized as a family with his business contacts from Japan. Another memory involves a family celebration and my now long-dead grandmother. And the most specific memory was having dinner at Benihana with some guy whose name I can’t remember before his Saint Ignatius High School senior prom. We were served alcohol with dinner – score!

Here’s another thing I know about the restaurant industry in San Francisco in the late ‘70s: Don’t do it. During those Benihana halcyon days, my mother owned a public relations business in San Francisco. Several of her major clients were prominent restaurants of the day: the Graf Zeppelin in Ghirardelli Square, MacArthur Park. She also opened all the original Chuck E. Cheese Pizza Time Theaters, as Nolan Bushnell, the founder of Atari, was also her client. If there’s one mantra my mother drilled into my head, it’s that there’s no faster way to lose your shirt than to go into the restaurant business. Even back then, the margins were slender to none.

I can’t help but bring my childhood into this 30-plus-year-old case study. Geez, I even remember the Benihana of Tokyo print ads. Why am I including my recollections in a supply-chain analysis paper? Because this case study calls up my memories of what Benihana was once like, and its strengths – and also uncovers the weaknesses I can easily spot now from a supply-chain perspective. Any credible supply-chain consultant would visit his client, and if possible, experience the service for himself before completing a detailed analysis for the client. Knowing what I know about Benihana’s history, it would be unprofessional to exclude my observations.

Based on those observations, I can’t envision the restaurant as effective or efficient, at least based on what’s in the case study. I can’t evaluate the success, because all I see in the case study is the expense. Its operations obviously aren’t efficient. And since we don’t have complete financials, we can’t truly say it’s effective either. Since I know a little of the real company’s history – including what a showboater Rocky Aoki was – my analysis is colored, dyed bright red if you will, by my real-world knowledge.

We even get a little Rocky Aoki showmanship in the financials included with this case study. We don’t get profit figures – we get gross revenues. The Benihana budget for advertising is 8 to 10 percent of gross sales – way higher than the typical restaurant according to the operating statistics in Exhibit 1. And Benihana’s rents are quoted as 5 to 7 percent of sales, which is much higher than the standard 4 to 5 percent of fixed operating expenses.

In reading the case study, I identified four major supply-chain issues:

  • The chefs, staff and management imported from Japan
  • The restaurant construction and décor, also imported from Japan
  • The floor plans and table layout
  • The table turns

Chefs, staff and management imported from Japan

Rocky says in the case study “One of the things I learned in my analysis was that the number one problem of the restaurant industry in the United States is the availability and cost of labor.” Umm, something tells me that recruiting highly trained chefs in Japan, teaching them English for six months and then importing them to the U.S. is a lot more expensive and a lot less readily available than labor in this country.

The basic linear programming doesn’t work out favorably. Linear programming is a technique used to allocate limited resources among competing demands in an optimal way. Imported Japanese chefs are obviously a limited resource, especially since in the original way Rocky set up his business they had to return to Japan eventually. If the goal is to maximize profit, it’s easy to envision that a typical Benihana restaurant, which requires six to eight Japanese chefs, is going to be much less profitable than a restaurant which keeps its cooks in the kitchen and can probably just hire one imported chef from Japan who can then train the other staff needed.

The company’s VP of operations admits one of its biggest constraints is staff, especially since “each unit requires approximately 30 people who are all Oriental.” In addition to importing many members of the team, Benihana at the time was also offering the same “obligations” to staff as companies in Japan would, further decreasing effectiveness in the U.S. market.

The restaurant construction and décor

The most inefficient practice has got to be the construction and décor. At the time of the case study, the walls, ceilings, beams and other materials for the 16 restaurants were all gathered in Japan. Further compounding the expense, they were reassembled and constructed in the U.S. by Japanese craftsmen overseen by American unionized construction workers.

Now, going back to my childhood experiences, I have to admit that San Francisco’s Benihana was a standout, at least to a teenager, in a city known for its distinctive restaurants. But couldn’t Benihana just copy the décor from the first few restaurants – which were located in big cities like New York and Chicago, where the clientele is more sophisticated and harder to please – to all the succeeding restaurants? Did it all really have to be imported from Japan, with extremely expensive Japanese construction labor imported to go along with it? Couldn’t they just find a clever architect and a talented builder and copy it? The average customer would never know the difference. The company’s own data shows the average customer is NOT from Japan.

Much of the case study focuses on the company’s prospects for growth. At the time of the case study, the company could only open five units a year, because that’s as fast as the two crews of Japanese carpenters could work!

The floor plans and table layout

Rocky describes 22 percent of a Benihana operation as back of house, while the standard restaurant requires 30 percent. First of all, eight percent more front-of-the-house space is not radically different from the norm he cites. And when you require a lot more intensive staffing to serve that front-of-the-house crowd, I fail to see where there is any efficiency with that model.

He says he “eliminated the need for a conventional kitchen,” but according to the floorplan, well, he still has a regular kitchen with regular kitchen equipment, along with 14 mini-kitchens with stoves! Just in fuel consumption alone that will cost more, especially since the chef has to turn stoves on and off all night, versus running continuously in a regular kitchen.

Each table accommodates eight diners, with a chef-and-waitress team to serve every two tables. Most restaurants don’t have a chef, or a waitress, who serve only two tables at a time. That seems like an extremely high, extremely inefficient ratio. In a regular restaurant, one non-Japanese, non-imported chef, along with prep workers, might serve a whole restaurant, and a waitress might serve four to five tables simultaneously.

The table turns

What I remember most about Benihana was not the food, but the experience. And the type of occasions I ate there – special guests from out of town, family celebrations, proms – bore out that Benihana is experiential dining, not ordinary dining. I’m simply not buying that the average turnover at a table was an hour, as stated in the case study. First, due to the style of cooking, all the guests have to be seated together. So if you’re serving two parties of four at one table, you have to wait until all the guests have arrived until they can be seated. And people tend to talk more in this family-style arrangement, and drink more, and linger.

Second, when you are limited to tables of eight, you limit the number of turns you can perform in one night. Turns are an extremely important aspect of the restaurant business – I learned this from my mother. A turn is the number of times you can turn a table over in a night with new guests. The more table turns, the more revenue. Obviously, if you have table turns for alternating numbers – like two, or four, or six, or eight – over the course of an evening, all occurring at different times, you can generate a lot more revenue than if your operation is limited to groups of eight which can be seated only at limited time intervals. This could also be readily measured and evaluated with linear programming.

Seating guests in tables of eight also brings up an obvious customer service issue: What happens when one party of four has arrived, but the other has not? Now, the staff has to juggle to replace them quickly, so the table can be seated together and revenue can be generated. This is not a problem in ordinary restaurants, or even in family-style restaurants like Louis’ Basque Corner, simply because the food is not custom prepared at the table by the chef.

There’s also the related issue of job design for the chefs. In a regular restaurant, a chef keeps cooking until it’s time for a break. At Benihana, there is a lost opportunity in cooking time as a chef closes down and says goodnight to one table, and then has to move on to the next table.

What does hold up

One area of Rocky’s stated efficiency holds up: the menu. Reducing the menu to three basic, easily cooked entrees certainly eliminates waste, and allows Benihana to negotiate better agreements with suppliers. The limited menu keeps inventory low and reduces costs of inventory management.

Conclusion

As a model of kaizen, as a model of continuous process improvement, Benihana fails. If the company was about kaizen, it would have realized early on that many of its processes were inefficient and wasteful. Benihana’s success was due to clever advertising and savvy promotion by Rocky Aoki, who was known for wacky stunts like having a hot tub in his Rolls-Royce and suing four of his seven children.[1] Rocky’s extensive quotes in the case study paint him as a visionary, not an operations or numbers guy. Yes, Rocky eliminated some food waste, but he created a lot of other waste in his operations and supply chain. It’s straightforward to deduce that the care and expense that went into the old San Francisco restaurant I recall fondly simply couldn’t be replicated past more than a handful of additional restaurants.

Benihana of Tokyo is in the entertainment business, not the restaurant business. That’s the lens through which Benihana should have been evaluated: it’s treated as a restaurant case study, not an entertainment case study. Some of the Benihana practices which make little sense in the restaurant business – high advertising costs; expensive, lavish “sets;” rarified, imported talent – make perfect business sense in the entertainment industry. We should be comparing it to those supply-chain norms, not the ones supplied.


[1] Read more about the interesting life of Rocky Aoki in a New York magazine profile, Rocky’s Family Horror Show

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Teaching smart people to learn

26 Jan

“Failure is the opportunity to begin again more intelligently.” — Henry Ford II

In a Harvard Business Review article, Teaching Smart People How to Learn, Chris Argyris points out the invisible obstacle that even the best and brightest among us can’t outrun: the self and its defense mechanisms against failure.

Exposure to failure is critical for human learning and growth. Yet few people consciously approach failing openly with that goal in mind. How do we set up “controlled” failure with learning as its goal?

I worked in health care marketing communications for 13 years, primarily in an acute-care hospital setting. When you work in the hospital environment, you get to know nurses really well – how they’re oriented, what drives them, how they behave. And for every nurse I’ve ever encountered, the No.-1 value and belief is “The patient is first.” In fact, they even make a Florence Nightingale pledge at their pinning ceremony, similar to the Hippocratic oath physicians take.

In the acute-care environment, where managing costs and lengths of stay are the bywords of the day, this patient-first focus is bound to cause tension between nurses and management. Argyris’ article brought back memories from early in my career, memories of entrenched nurses and equally entrenched management team members, each seemingly unwilling to admit another viewpoint or approach. (This entrenchment eventually led to the nurses unionizing.) The more one group tried to argue for the “rightness” of its approach, the more upset the other became. Their values were simply too far out of line.

As referenced in the article, one of the most difficult personal balancing acts is to reflect critically on one’s own behavior. Humans tend to align around basic defensive values that promote a sense of personal success. I applied this more broadly than just people identified as being smart through their education or achievement; I think most employees, at all levels, are smart.

Argyris studied and dissected a fairly uniform and homogenous group: high-level management consultants at firms such as McKinsey. However, the possible approaches he outlines become more complex in your typical heterogeneous large organization than in the somewhat rarefied population he studied. Certain employee populations will be even more resistant to failure and learning than the management consultants studied, especially if there is a pernicious anti-management bias.

Argyris says “Defensive reasoning can block learning even when the individual commitment to it is high …” Well, what about when the individual commitment to learning is low? Not every employee values learning — some are resistant. What then?

I strongly agree with Argyris’ primary conclusion: Senior management should turn the mirror on themselves first. In interpersonal relationships, at the moment you begin to most blame the other person, that’s the moment you most need to observe your own behavior. Sometimes, it’s your own fear speaking. So for a particularly volatile situation, perhaps management should practice observation and looking within for a period of time first. No question, these are tough skills to teach. If the layers are too embedded, too hostile, the case-study approach he outlines might be really difficult or ineffective, even with outside consultants leading the discussion.

This article was published in 1991, so presumably there has been additional research and new knowledge acquired about how to help people learn. What more have we learned since then about how to help people learn best and question their assumptions?