The art of the dumpling: Learning from Din Tai Fung

With its carefully measured 18 folds and paper-thin skin, Din Tai Fung’s xiaolongbao soup dumpling has turned the restaurant chain into one of the most successful international brands in Asian dining, and spawned imitators.

But unlike many other “signature” foods — McDonalds’ Big Mac, for example — Din Tai Fung did not invent the soup dumpling.

It is thought to have originated in a suburb of Shanghai. Yet the chain has become so synonymous with the xiaolongbao that its chefs churn out more than 10 million of them a month across its network of restaurants.

Queues of hungry customers regularly wait an hour or more at its restaurants to tuck into the golf-ball-sized parcels of minced pork and broth.

Intrigued by the growth and international success of Din Tai Fung, I spent 18 months following its top management at its headquarters in Taipei.

My insights became the basis of a business school case study that last year won the Best Teaching Case Studies Award at an international gathering in the United States.

Din Tai Fung’s approach to business is conservative and cautious but also highly focused. Here are four lessons from a successful Asian service business taken from our study.

1. Cherish your reputation

Din Tai Fung opened its first restaurant in Taipei in 1972, but it was not until the mid-1990s that it began to expand beyond its native Taiwan. It was then that The New York Times listed it as one of its 10 Best in the World.

Two years later, Japanese department store Takashimaya persuaded the chain to open its first overseas branch in the Shinjuku district of Tokyo.

Today, the Din Tai Fung brand has expanded to more than 110 restaurants in 13 countries and territories across Asia, the Middle East and the West Coast of the US.

With its one Michelin star and other awards, Din Tai Fung has built a gourmet recognition that is rare among chain restaurants.

Yet it continues to rely on word of mouth as the basis of its marketing, spending nothing at all on advertising in its native Taiwan.

Every year, Mr Yang Jihua, the CEO of Din Tai Fung and son of the chain’s founder, receives hundreds of requests from investors eager to set up new outlets in places as diverse as Israel and Pakistan, almost all of which he turns down.

He finds opening new branches “very scary”, he told me, and feels a heavy sense of responsibility to maintain Din Tai Fung’s high standards. Mr Yang is in no hurry to expand, believing that it is better to do well by keeping standards high, rather than rush to grow and see standards fall.

2. Focus on quality and consistency

Din Tai Fung’s philosophy is built around perfection — an approach exemplified in its restaurants where glass-fronted kitchens have become a signature feature of the restaurant theatre, showing off the chefs at work crafting xiaolongbao and other dumplings.

From the firm’s modest head office in Taipei, Mr Yang keeps a close eye on operations across Din Tai Fung’s restaurants, holding daily video conferences with branch managers and staff in Taiwan.

But unlike many businesses, Mr Yang places little emphasis on sales turnover as a mark of performance. Instead customer expectations always take priority over profits.

Daily sales targets and turnover are used only as a reference to prepare ingredients and schedule manpower, Mr Yang says. Din Tai Fung’s continued success depends on emphasising quality at every level.

3. Approach business as you would family

From a firm that began as a one-shop family business, Din Tai Fung maintains a family-oriented approach across its operations — from top management through to frontline service staff. One insider sums up the firm’s philosophy as “treating your staff and customers as you would treat your family members”.

It’s an approach that the company also applies to its relationship with suppliers.

Recognising that delivering consistent quality depends on top quality inputs, Din Tai Fung builds close ties with its suppliers and often pays more than its counterparts for ingredients.

Mr Gilbert Lee, the firm’s director of production technology, says Din Tai Fung’s buying principle is “quality first, price second”.

He says suppliers recognise this as a mutually beneficial relationship: Din Tai Fung gets the best ingredients for its kitchens, while suppliers drive up their own standards and reputation.

4. Value service staff

Din Tai Fung’s family approach is also reflected in what insiders say is an almost parental regard toward staff development and remuneration.

The company values quality service as much as quality food. As a result, in its Taiwan operation, more than 50 per cent of revenue goes to staff training, benefits and pay that are among the highest in the industry.

The firm sees its continued success as dependent on maintaining precise and high standards. But while there are many standard operating procedures, it also encourages staff to be proactive and apply their service approach to individual customer’s needs.

Across Din Tai Fung’s restaurants, staff are required to keep a daily work log, not to monitor sales or targets but to serve as a basis for company-wide learning and continuous improvement.

“Treat every customer as you would treat your family member; genuinely show them your care and concern” is the mantra from CEO Yang.

5. passion for precision

Din Tai Fung’s philosophy combines a passion for precision, excellence and consistency with recognition that the firm’s continued success depends on always living up to its reputation.

It has taken many years to build and can easily be lost if standards are allowed to slip. For a firm that emerged from a struggling family-owned cooking oil business, it’s a philosophy that has served Din Tai Fung well.

It’s amazing what you can learn from the humble soup dumpling.

ABOUT THE WRITER:

Brian Hwarng is Associate Professor of Decision Sciences at National University of Singapore (NUS) Business School. This article is based on a case study he wrote with Yuan Xuchuan, his former PhD student at NUS Business School, which won the 2015 Decision Sciences Institute Best Teaching Case Studies Award in Seattle, Washington, USA.