Power Couple

How many great husband-and-wife business teams can you think of? Us neither. But Kate and Andy Spade have figured out how to make their unusual partnership work. They've built a fashion empire — but can they make it last?

Kate and Andy Spade are that rare thing: a great husband-and-wife business team. What makes their collaboration so unusually powerful? It's all about their differences.

It's one of those dazzling South Beach days that feel suspiciously art-directed — warm sun, swaying palms, and a streetscape so teeming with the young, the hip, the buff, and the surgically enhanced that it feels like a casting call for Baywatch. In an office building overlooking Lincoln Road, Andy Spade — CEO of the hip fashion company Kate Spade — is in town doing manly work: auditioning models for a spring ad campaign. Midway through the parade of lissome lovelies, Spade's cell phone rings and he excuses himself for a hurried, slightly impatient, exchange.

"That was my mom," he confides, without the slightest attempt to pass off the caller as Gisele Buendchen begging for an audition. "She's having a grandchild and wants to know the sex. I told her we don't know yet."

That's an astonishing admission for a guy whose favorite word — indeed, whose approach to life — is "curious." Even his wife, the company's "Kate," is surprised that Andy has opted to remain in the dark about the gender of the couple's latest joint venture. But Andy has his own reasons for preserving the mystery: "It gives us something to talk about besides the business," he says.

For the past 11 years, the Spades have talked about little else. By any measure, it has been a remarkably successful conversation. Together, Kate and Andy Spade have built a $175 million business and a distinctive global brand. Launched nationally with an iconic $155 black nylon handbag in 1993, Kate Spade has since grown to include stationery, shoes, small leather goods, eyewear, and home furnishings, as well as a separate men's line, Jack Spade. They have 16 free-standing Kate Spade shops in the United States and nine in the Far East; more than 600 stores also carry the brand. Additionally, they have a thriving partnership with Neiman Marcus and a fledgling e-commerce business.

It has been an exhausting, all-consuming ride. And then, like many couples, when they turned 40, they had a moment straight out of the Pop Art cartoon: "Oh my God, we forgot to have a baby!" "It was something we always wanted to do, but you get caught up in the moment of the business," says Kate, 42, back in the company's sleek white showroom in New York. "This industry is very, very competitive," Andy chimes in, gesturing to a candy-colored array of handbags lining the walls. "And I didn't want to feel guilty about not spending time with a child. But now, we have a business, and it's strong. So I think there's an advantage to being our age and at this point in our lives. We can do this."

Few who know the couple would doubt their ability to balance yet another mutual effort. Indeed, although his wife has been the public face of the company, Andy is hardly just the man who accompanied Kate Spade to SoHo. The real key to understanding the success of Kate Spade, the company, is to recognize the frisson that comes from the collaboration of the two. Kate is the muse, the brilliant editor and product designer; Andy is the big-idea guy, the one who takes the risks, shapes the brand, pushes the boundaries. "Where they intersect is so meaningful in terms of values, taste, and the appreciation for the classics," says Julia Leach, executive vice president of brand strategy, who has known the two for 15 years. "But where they're different is where the magic happens and you get this thing called 'Kate Spade.' "

Finding a compatible business partner is never easy. Finding someone you can share both a bed and a company with is a near impossibility. How many great husband-and-wife business teams can you think of? While there are plenty of family businesses, the stresses of starting a company are particularly acute if both partners are living and breathing the operation 24-7. First, as in any partnership, there's the problem of role definition: Who's responsible for what? Then there's the issue of who has the final say on the big decisions — prickly enough if it's your brother-in-law, potentially lethal if it's your spouse. Maintaining professional decorum can be a challenge: The voice you use for pillow talk shouldn't emerge in a sales meeting, after all. And figuring out how to keep business from taking over your life, if your life is your shared business, is tricky too. The complications simply seem greater and the stakes higher all around. Or as Nan Langowitz, director of the Center for Women's Leadership at Babson College, puts it, "A couple-owned business is an emotional risk as well as a financial risk."

But when the collaboration works, there's unique power in being a power couple. Over the course of a decade, the Spades have navigated the shoals, pushing each other when one grew faint of heart, linking arms against those who would force them into decisions that violated their gut sense of where they should go. They've found a way to combine their individual strengths and compensate for each other's weaknesses, to forge a business that is both commercially successful and a reflection of their own values. And as Kate points out, there's one overriding advantage to their arrangement — the sense of complete trust each partner has in the other. "Knowing your best interest and the company's best interest is in the forefront of every decision being made without you is really comforting," she says. Adds Andy: "We're just great business partners."

Now, however, both the company and the couple are at a pivotal moment. With blistering competition in the core handbag business, there is increasing pressure to expand product offerings and retail stores. And if that weren't already enough to keep them up at 3 a.m., the couple knows the arrival of a baby will usher in a whole new batch of distractions and stress. For a pair that notoriously has trouble letting go of creative and artistic control, it's a particularly challenging time. "After 10 years, Kate and Andy are at a point where they're poised to grow exponentially," says Peter Arnold, executive director of the Council of Fashion Designers of America. "But they need to loosen up a little bit on their control of the brand and push the envelope in terms of appealing to a broader customer base. That's the inevitable tension that all designers have: How do I stay true to me and yet grow the business?"

For all the fey commentary the Spades generate in the fashion press — "the Nick and Nora Charles of the design world!" — in person the pair are unexpectedly down-to-earth, smart, and irreverent. Like many married couples, they finish each other's sentences. Andy, 42, the actor David Spade's older brother, has the family aptitude for deadpan humor. Kate has a dry wit, an Irish girl's raucous laugh, and a soft spot in her heart for her spoiled Maltese, Henry.

They're small — what Kate likes to refer to as "fun-sized"; Kate is 5'2", Andy, 5'5". Kate is stylish without the intimidating edge of New York fashionistas; sure there's that signature cocktail ring, but it's paired with a working girl's cardigan buttoned over a maternity top. Andy prefers the look of the slightly rumpled ad agency creative director to that of fashion industry CEO: longish hair, jeans, a checked shirt, a corduroy jacket, a baseball cap, and nails bitten to the quick.

Both hail from the Midwest and acknowledge that heartland style and values still serve as touchstones in their "New York Lite" design aesthetic. Andy was born in Michigan and moved to Arizona at age 9. Kate Brosnahan was the fifth child of six in an Irish Catholic family in Kansas City. The two met while in college at Arizona State. After graduation, Kate headed to New York where she bunked with four other girls in a two-bedroom, one-bath apartment in Hell's Kitchen. To help pay the rent, she took a temp job that led to an editorial assistant's position at Mademoiselle magazine for $14,500. Andy remained in Tempe running his first business — a small ad agency, which, despite its size, was named one of the state's "Top 10 New Companies" in 1987. "A bad year for business in Arizona," he cracks.

The following year, Andy followed Kate to New York where the two found a tiny apartment in SoHo. Andy took a job at Bozell & Jacobs, then zigzagged up the advertising career ladder. Kate climbed the masthead at Mademoiselle, becoming, at 28, senior fashion editor covering accessories. While her career was moving along briskly, the road ahead held little appeal. "I wanted to do something I could get interested in," she says. "I told Andy, 'I just want something that will keep me busy.' Trouble was, I couldn't think of what that was."

Andy suggested she launch a line of accessories. Kate was flabbergasted. "I said, 'Andy, you don't just start!'" But Andy was insistent. She could design, and he'd work to pay the rent and provide the capital. "I thought we could do it for a year, and if it didn't work out, she could go back to the magazine," he says.

Andy, the visionary, has the audacious idea. Kate, frugal and more conservative, executes the product with style and an exacting attention to detail.

It was the first indication, perhaps, of a pattern that the two would repeat over the next 10 years: Andy, the visionary, has the audacious idea; Kate, frugal and more conservative, executes the product with style and an exacting attention to detail. The result was a series of fresh, yet precisely rendered breakthrough designs delivered on a shoestring.

The fact that the first product was a handbag, Kate says, was "kind of random." As a fashion stylist — and consumer — she found herself looking for accessories she just couldn't find, even in New York. Back in 1993, the handbag market was largely a tedious landscape of brown and black leather, light years away from the kaleidoscopic smackdown it has become. And that made it ripe for innovation, even by two Midwestern greenhorns.

But with no fashion training, Kate was intimidated by the prospect of designing a product. "Andy can see further out — without being nervous," Kate says. "I can see too — but I know what could happen." Andy egged her on: "Katie, it's the idea," he'd say. If you have a great concept, you can get some technical expert to lay it out. So Kate made a prototype out of construction paper and took it to a pattern maker, and then to a sewer who made a sample.

The first bag was a simple square, burlap with a raffia fringe. The material was the default choice when no company would sell them the fabric they really wanted in the tiny quantities they could afford. Eventually, they produced a few more samples in bright linens and introduced them at the big Accessories Circuit show in New York. In short order, they had signed up Barneys, Fred Segal, and Charivari, three of the hottest retailers in the business, and garnered flattering editorial coverage in Vogue and Elle.

Still, looking at their bank statement, Kate was in despair. "I said, 'Andy, we didn't even cover the cost of doing the show or making the samples!' It was kind of a loss. I thought, It didn't work out and now we have to stop."

Once again, it was Andy's vision and bravura that kept them going: Getting such great accounts, he insisted, would build their image. For three more years, the company got good notices but made little money. Refusing to seek outside funding, Andy kept working at the ad agency, helping out with promotion and marketing on weekends and evenings, while Kate scoured the markets for interesting fabrics.

In 1995, the two were married. A year later, Kate won her first CFDA award, an industry imprimatur, and several collections were big hits. Andy finally made the leap, leaving TBWA\Chiat\Day to work full-time on the company. "I thought it was a lifetime opportunity, and I would regret it if I didn't try," he says. "I figured I'd do it for two years until we got it up and going, but it just started growing and growing. It took every ounce of energy we had, and it just didn't stop."

As the company took off, the need to define roles became more urgent. Andy, who had always functioned best in a creative role, assumed the CEO mantle despite having little experience and, frankly, little interest in the operational side of the business. In 1999, Neiman Marcus and Saks Fifth Avenue adopted the line for all their stores, making the company's business soar. Additionally, Neiman bought a 56% stake in Kate Spade for $34 million. Recognizing the need for more industry expertise, they hired Robin Marino, an executive at Burberry Ltd., as president.

Striking a blow for boundaries between their professional and private lives, the Spades finally stopped shipping out of their apartment and took a floor in an old building in New York's Flatiron district. They now occupy five floors in the building. Kate's office is one floor above Andy's. But to Andy's occasional dismay, the boundary setting had its limits: Kate would begin talking about business the moment she woke in the morning. "Andy would say, 'My God, your feet haven't even touched the ground!' " Kate says. Now, they try to keep shoptalk down at home.

The two had what may have been their biggest difference over the business in 1996. Andy felt it was time the company leaped into freestanding stores, while Kate resisted the idea. "I was really hesitant," she says, because of the financial commitment. But they have a simple rule for resolving such conflicts: The partner who feels the most passionate gets to make the call. So they began with a tiny 300-square-foot space on the fringes of SoHo; the flagship is now 10 times bigger. "Now Andy gets to say, 'I told you so,' " Kate laughs.

The Jack Spade store around the corner is a sort of laboratory for Andy Spade's ideas about marketing and merchandising. It's filled with odd objects — a huge stuffed shark, an apothecary chest filled with boy things such as guitar picks and rulers and razors — and houses a lending library with fella-friendly authors such as Sir Walter Raleigh, and an old Boy Scout manual. There's Jack Spade cocoa and, soon, a proprietary steak sauce. Jack Spade films (the latest of which, Dimmer, has been accepted at Sundance) are available on DVD. And, oh yes, there's an array of messenger bags in waxwear, canvas, and leather; ties, shirts, and mittens on strings, all for sale. The idea? To embody the brand in a way that doesn't feel like a retail store. "People hate when you try to sell them things," Andy says. He knows that younger consumers are most intrigued by things they find themselves, not what's shoved down their throats through advertising.

It's an appealing thought that a couple of kids from the heartland can start a company with just a good idea and a lot of moxie and turn it into a multimillion-dollar business — yet preserve the iconoclastic spirit on which it was founded. Trouble is, in 2005, the sharks aren't just hanging on the wall. They're circling the waters, fighting for retail real estate, battling for brand share. The business is no longer the sleepy category the Spades entered in 1993. "The biggest challenge the company faces is the onslaught of competition, which is at least twice what it was four years ago," says Ron Frasch, vice chairman of Saks Fifth Avenue. Coach, for example, which competes in the same price range, had sales last year of $1.3 billion, and Tommy Hilfiger, Ralph Lauren, and Michael Kors have all expanded their handbag divisions. Meanwhile, at the higher end, Louis Vuitton, Gucci, and Prada all scramble to have an "it" bag every season — a strategy that Kate has rejected. Bad idea, Frasch warns: "If you don't react to trends, you're going to get your brains beat out at retail." Saks has relegated the brand to the fifth floor, with younger labels like Juicy and Moschino, across from the store's designer jeans department, rather than showcasing it on the main floor with the more fashion-forward brands.

There have been past seasons, the Spades confess, where they lost their focus and their product mix hasn't been quite right. Burt Tansky, CEO of Neiman Marcus, refers to their troubles as a "challenging period" but says the line is now looking strong again and that there's no truth to the rumor that Neiman was looking to sell its stake.

One way to counter the competition is to expand aggressively on the retail front, and Andy estimates the company will roll out 50 of the mainstream Kate Spade stores in the next five years. Still, that's far short of the LVMH juggernaut, or Coach's plan for world domination through its 280 retail stores around the globe.

But what outsiders don't quite understand is that on some level, Kate and Andy don't really give a damn. It's not that they don't want to build a bigger, more successful company — they do. But empire-building in conventional terms? Sorry, not their cup of tea. More than anything, Kate and Andy want to stay true to what they built — even if it means settling for a smaller piece of the pie.

The two admit that their unconventional attitude about growth, combined with their iconoclastic ideas about branding, have complicated their search for a new CEO, a goal Andy announced last year. That person, he concedes, will need to be able to run the business, but understand that the definition of success at Kate Spade is about a lot more than simply making bigger numbers. The candidate will also have the daunting task of pleasing not just one, but two founders.

The pressure has only increased as the baby's birth draws nigh. Like expectant parents everywhere, the Spades are finding their priorities already undergoing a radical reordering. One of the advantages to having your name on the door, they both agree, is the ability to set your own work schedule, an option Kate plans to exploit to the fullest. And if somebody should complain that she's sneaking out the door at 4 p.m.? "Expect it!" she snaps. "We're fortunate to have flexibility," Andy adds. "Kate can cover for me, and I can cover for her."

The imminent arrival of Baby Spade has made questions of quality of life — and legacy — snap into clearer focus. "My child is going to be born in February," Andy, the branding guru, says. "I want him or her to look at this and say, 'That was a really cool company.' Not a cool bag — a cool company."

From the design department, another voice pipes up. "I couldn't imagine doing this with anybody else," Kate says.

Linda Tischler is a Fast Company senior writer.

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