Managing Marc Jacobs

(Fortune Magazine) -- In February 2007, Robert Duffy sensed something was wrong with his longtime business partner, the fashion designer Marc Jacobs. "Something was going on in his personal life, but I wasn't 100% sure he was back on drugs," says Duffy, who was overwhelmed with work at the time and hoped his intuition was off.

The duo had recently wrapped their New York City fashion show, and they were in London to unveil another collection and open the company's first store there.

Now Duffy was standing in the lobby of Claridge's hotel, and Jacobs was three hours late for a dress rehearsal of his show that night. "I'd been through it a million times," Duffy says today, "and I wasn't going to go through it again."

Duffy decided to take action, as we'll see. And in doing so, he probably saved the business that he and his partner had nurtured for two decades, and perhaps even saved Jacobs's life.

In the fashion world, it seems, behind every successful designer there's a Robert Duffy - a right-hand man who enables and goads the artist to create a viable business. The designer Yves Saint Laurent had Pierre Bergé, who took charge and financed his company after Saint Laurent suffered a nervous breakdown in 1962. Valentino has Giancarlo Giammetti, a brusque enforcer who, after nearly 50 years, still protects the designer from the mundane details of balance sheets so that he can focus on his opulent creations.

Duffy's talents lie in multiple areas - as a retailer he has even moved more merchandise per square foot than Steve Jobs; as a corporate infighter he has proved adept at protecting his partner's vision; and as a facilitator he has made sure that every element of the corporate culture at their company is an extension of Jacobs.

"Robert is the producer," says filmmaker Sofia Coppola, who is often described as a Jacobs muse (she has appeared in ads and inspired the bestselling $900 Sofia Bag). When Coppola wanted to design some bags for the company, Duffy made it happen. And, she says, "he creates such a nice atmosphere in his stores."

Atmosphere aside, Jacobs is the engine that drives a $5 billion business. Since 1997 he has been the creative director of LouisVuitton, the "LV " in the international luxury conglomerate LVMH. Ever since Tom Ford helped transform Gucci from a tired accessories company into a global fashion brand, luxury goods companies have been reaching out to designers to energize their venerable labels.

At Vuitton, Jacobs and Duffy have taken a brand that was stagnant when they arrived and quadrupled its sales from $1.2 billion to $4.8 billion, along the way maintaining profit margins above 40%. Jacobs and Duffy also have their own company - Marc Jacobs International.

LVMH owns 96% of MJI but only 33% of the trademarks, meaning that LVMH has power of the purse, but Jacobs and Duffy maintain creative control. MJI produces two strata of clothing: a high-end Marc Jacobs collection ($2,000 dresses and $1,500 quilted-leather bags) and a lower-priced label called Marc by Marc Jacobs ($300 baby-doll dresses and $460 leather weekender bags).

So when Jacobs goes missing, as he did before his London fashion show, there's a lot at stake.

Duffy and Jacobs inhabit a world with challenges and temptations that the average corporate manager does not face. Actresses Julianne Moore and Hilary Swank wear Jacobs's designs. The brand's cultlike following is such that Demi Moore and Bruce Willis's daughters - Rumer and Scout - work part-time at Marc Jacobs's L.A. outpost on Melrose Drive.

The company's Christmas party, a masquerade ball, draws movie and music celebrities including Coppola and Debbie Harry, all in costume. Last year Duffy dressed as Michelangelo, and Jacobs as a plumed pigeon. The year before Duffy swaggered around as a cowboy gunslinger in black satin, and Jacobs decked himself out as a giant pig.

It's unlikely your boss donned wings and feathers at the holiday party last year (if he did, please e-mail a JPEG to fortune.com). But it's precisely the outlandishness of the fashion world that makes it a perfect laboratory in which to examine, in its purest form, an issue endemic to all businesses: how to manage creative but complex people. And in that mission Duffy has excelled, providing lessons useful even in the drabbest precincts of corporate America.

The simple fact is that Duffy is crucial to Marc Jacobs, according to Gail Zauder, managing partner of boutique investment bank Elixir Advisors, which has brokered deals with LVMH and Liz Claiborne. She calls Jacobs a "phenomenon" and distinguishes him from fashion stars like John Galliano and Michael Kors, who were also retained by LVMH, to design for the Christian Dior and Celine lines, respectively.

Next page: Managing Marc Jacobs

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