Deciding to Go Digital

Food and Time

There are two ways to learn quickly about restaurants. The more fun method involves eating a lot of food at a lot of joints. The other requires working at those joints. This is why, in late June, Rik Reppe, 36, found himself waiting on tables at the Rocky Cola Café in Los Angeles. Forget about the glamorous life of high-priced consultants: This was market research. For about six weeks, six Diamond consultants got their hands dirty. They worked deep fryers, rode in delivery trucks, and tolerated lousy tips. They infiltrated the industry -- and they came up with a plan.

Diamond Technology Partners isn't your garden-variety consulting firm. A scant five years old, it has grown to approximately 300 consultants, $82 million in revenue, and a $600 million market cap by marrying business strategy and information technology. Its teams work with big companies to analyze and to identify electronic commerce opportunities. In a short time, Diamond has become a big draw at MBA placement offices -- in part because of the white-hot market niche it inhabits, but also because it offers stock options to all consulting hires.

The Diamond partners leading the Alliant engagement were John Sviokla and Peer Munck. Sviokla, 42, had arrived in 1998 from Harvard Business School, where he had coauthored an influential 1994 "Harvard Business Review" article called "Managing in the Marketspace," a seminal work that predicted the dislocation and commercial opportunities of the online world. While at Harvard Business School, he developed its first course in electronic commerce, and Rick Schnall had been one of his students; so when CD&R decided to seek consulting services, Schnall called Sviokla first.

Munck, a 43-year-old Norwegian, was a career consultant, a10-year veteran of Strategic Planning Associates before he joined Diamond. Munck's passions were as various as the Net itself: Grateful Dead devotee, composer, and keyboard player, his band jammed all night at one of Diamond's quarterly staff meetings. He held a patent for an "antiswing stabilization unit" to counter the pendulum motion of cable-suspended cargo; Munckloader Engineering, a company he cofounded, supplied cargo-handling equipment to bulk vessels. And he had traveled the digital world widely: Alliant would be his fifth big e-commerce gig.

Munck and Sviokla joined their Diamond colleagues in the institutional kitchens of America. This is what they learned: The restaurant business isn't really about food. That's what ends up on dinner plates. But the food itself isn't that big a deal for the restaurant owner. "What these guys really need," Munck says, "is more time. They deal with 100% annual staff turnover. They work 70- or 80-hour weeks, and they don't take vacations. They have no time to plan menus or to target new customers, which is where they really should be spending time. All that for a 5% profit margin."

Diamond believed that the Web offered a solution. A Web site would allow owners to buy food and supplies online from many distributors; they would get Alliant's price lists, along with catalogs of competing local and regional providers. Customers could use pull-down menus to modify set orders by week or by season. They could rate distributors' wares and services, much as readers do at Amazon.com. And food suppliers could buy intelligent ads to sway order decisions at the right moment.

The new company would take a cut of purchasing transactions. It also would use the aggregating power of the Net to give restaurants more buying power in other areas. Together, restaurants could negotiate priority service with heating and air-conditioning contractors, or get better rates from communications vendors. As the community of restaurants expanded, so would the opportunities for partnerships.

It was all doable, Munck and Sviokla decided. And it could be done fast. But it couldn't be done by Alliant. For one thing, the venture had to appear independent: Restaurant owners had to feel comfortable that they were getting independent advice and the best possible prices. Other participating distributors had to be convinced that Alliant wasn't getting preferential treatment. Alliant, for that matter, would have to compete on the same site with direct rivals -- something it likely wouldn't allow on a proprietary system.

More daunting, though, were the cultural barriers within Alliant. "In a $6.1 billion company that's been in business for a long time, you don't have the culture that allows you to fail or to take risks, that allows you to make decisions in hours instead of weeks, that has no bureaucracy," Munck says. "A startup operates at a completely different pace -- you work nights, you work weekends. Alliant won't tend to hire the sort of people who want to do that."