Sense and sensibility: Maria Eugenia Giron applies the latest Harvard MBA thinking to classic Spanish jewelry maker Carrera y Carrera. (Regional Report: Europe).

Manuel Carrera proudly shows off a stingray he has sculpted in silver, encrusted with a natural geode that seems to grow out of it to form its wings. It's a bit on the florid side, but it's an impressive piece of workmanship. Carrera y Carrera has been doing this kind of thing in Madrid for 117 years, and it has made the Carrera family name renowned in Spain for intricately crafted jewelry and objects.

Manolo, the 63-year-old grandson of the founder, beams--at me but particularly at Maria Eugenia Giron (pronounced CHIron), who is standing next to me. She is a crisply elegant young woman with an engaging gap-toothed smile, and she looks oddly like a proud parent, which, in a way, she is. As chief executive of Carrera y Carrera, Giron has been Manuel Carrera's boss for the past three years--a move he willingly engineered. It was the smartest move he ever made, and he quite obviously adores her.

As well he should. When Giron and a group of investors took over Carrera y Carrera in a friendly management "buy-in," the company was stuck in its past. Its craftsmanship was exquisite but its design sensibility was more than a little old-fashioned. Carrera's traditional buyers loved the ornate, sculptural quality of its jewelry--a hallmark of the house and something that sets it apart from its competitors. But that market was getting smaller all the time. The company needed a makeover if its artisan tradition was to live on.

Enter Giron, a 37-year-old Madrid native with training as an industrial engineer and a Harvard MBA. Despite her technocrat background, Giron discovered she loved beautiful objects and had a tremendous respect for the artists who make them, even if she isn't one of them. "Harvard opened my mind to the fact that creativity could be organized and managed--that, in fact, creativity was a growth industry, and it needed all the talent it could get," she says.

That insight led Giron to Loewe SA, the luxury Spanish leather maker bought by LVMH in 1998. Loewe is where she learned that a well-managed brand could reconcile an apparent paradox: It could have a single, identifiable personality throughout the world and still manage to satisfy the widely disparate needs of different customers in different markets. Loewe is also where she met the colleague who would help her implement her ideas about how to manage them as chief executive.

British VC helps revamp Spanish tradition

In early 1999, Giron and Louis Urvois, her former boss and mentor at Loewe, approached 3i, a British venture capital partnership, to help them buy out most of the Carrera family's interest. Giron and Urvois took a 57 percent stake in Carrera y Carrera, to be financed partially by future profits, while 3i took around 30 percent. The Carrera family retained the remainder.

"When Maria Eugenia proposed the investment to us, it was obvious the job needed somebody young with a lot of energy," says Ignacio Cruz, a 3i partner. "It was not an easy job--everything had to be changed, from marketing to information systems to administration."

Since Giron took over, sales have doubled. Last year, retail sales climbed 31 percent to around $42 million, despite a distinct post-September 11 drop in the U.S. market--70 percent of all sales come from outside Spain. More important, more than half of Carrera's current volume comes from products introduced in the past two-and-a-half years.

"I love being CEO --you have the pleasure of solving these problems yourself," says Giron. "But you must be successful: That's what the people who work for you expect of you. You are achieving through others, and they have to have something to show for it."

What Giron has pulled off is a tricky balancing act that's actually a lot harder to do than it is to describe. Like other small European family concerns with deep artisan roots, Carrera y Carrera's value as a company and as a brand clearly lies in its heritage. But an incoming CEO can neither worship that past nor toss it away--particularly when that CEO comes from outside the company.

Moreover, any changes--even much-needed ones--that overturn hallowed traditions risk alienating the artisans who are the historical memory of the house. If they leave, with cause or without, the noble brand is little more than an empty shell. When Giron arrived, for instance, all of Carrera's employees worked from 7:30 in the morning to 3:30 in the afternoon--manufacturers' hours in Spain. That's the culture Carrera believed it belonged to. Unfortunately, that meant that when U.S. stores opened for business in the morning, all of Carrera was about to close for the day. Giron immediately moved 30 employees to later shifts, and some of them still resent it. "It sounds stupid, perhaps, but it's a key factor in changing the culture from manufacturing to marketing and making everybody think in terms of customer service," says Giron.

Giron imagined a revamped company from top to bottom, but always in conjunction with Carrera's executives and artisans. Changes were never mandated by fiat but always bubbled up from consensus. "Listening is not a weakness--it's the best thing you can do," she says. "Anyone can convince me that my idea is not the right one. When you become frightened and defensive, you become very rigid, and that never works."

Remarkably, only one of Carrera's designers left the company, and that was to change careers altogether. That's not to say there weren't missteps. Early on, Carrera launched a sleek, stylized line of jewelry with interlocking rings and colored stones. It looked nothing like anything Carrera had done before. Carrera's signature miniaturized animal sculptures--in this case, panthers--were still there, but barely visible from the side.

It was a disaster. It didn't offer Carrera's traditional customers what they had come to expect, but the company hadn't remolded its image enough to attract new customers. "We hadn't provided the value-added intricacy associated with Carrera," says Giron. "That's what our customers expected of us. Basically, we ran before we could walk."

Classic patterns look sleek, modern

Giron quickly found her stride. She used the company's archives as a source of inspiration for new products, building on the classic patterns from its heritage but changing the proportions to give them a more modern feel. An old collection based on a horse-head shape looks clunky and overwrought; the new version is sleeker, lighter, but you can still see the origins of the older design in its lines.

Giron leads the way through the workrooms, located about a 40-minute drive from downtown Madrid. Artisans are painstakingly sculpting wax molds of tiny gingko leaves -- basically the same process that Manuel Carrera's grandfather pioneered a century ago. Those molds will be cast in silver and gold and strung together in bracelets, necklaces and earrings.

The collection first came out a year ago, and it was largely responsible for sales in Spain doubling last year. The style is pure Carrera, but the subject matter is different. It marked the first time Carrera had applied its miniature craftsmanship to the world of flora-fauna being the design house's traditional subject matter. The buyer Giron is targeting is more than likely a woman and a younger woman at that--a risky proposition in a business where over half of all sales are made to men. Women buying jewelry for themselves currently account for only about 20 percent of all jewelry industry sales. "They don't feel comfortable purchasing jewelry-- women still tend to ask a man to buy a specific piece for them," points out the CEO.

She is betting that's going to change, and she's molding the company to the image of the woman who's tough enough to buy her own brooch--her image, when you get right down to it. Everything about the company, from the use of actress Penelope Cruz in Carrera y Carrera's advertising to the new design of the company's stores, is designed to appeal to a customer who looks a lot like Maria Eugenia Giron: broadly educated, cosmopolitan and afraid to buy jewelry with money she has earned.

You can see the change in the newly designed store on Ortega y Gasset Street in Madrid. It's small but inviting, and it has none of the austere, museum quality of so many jewelry stores that almost screams, "Do not browse here."

"The interior of a jewelry store has always been made to look like some kind of a temple," explains Giron. "We want ours to give women the idea that they are free to come in, sit, relax, even if they don't buy anything. A store is the best way to communicate all the intangible messages linked to a brand that you could never convey in a magazine ad."

Lladro partnership backs more than 10 new stores

The only problem now is, it's all moving too slowly. Giron may be the boss, but the economic slowdown has revealed the extent to which Carrera y Carrera's destiny still lies in the hands of others--in this case, independent retailers. Not surprisingly, they aren't bold enough for her, and she worries that their timidity may slow the company's momentum.

"When times are difficult, instead of working with us, some of them mummify," she fumes. "One retailer in the U.S. tripled his business with us last year but refused to increase the amount he spent on our brand because he was afraid of the future. It really made us think that we need our own network of stores."

To do that, Giron forged an alliance with another wellknown Spanish name whose second generation is also looking to modernize its image and expand. Last December Giron engineered the sale of a 45 percent stake in Carrera y Carrera to Lladro, the well-known manufacturer of decorative porcelain figurines. It's a thriving business that brought Lladro revenues of roughly $163 million in 2000. But much of that comes from statuettes of shepherdesses, ballerinas and other drawing-room staples. The second generation of the Lladro family faces questions much like the ones Giron faced. And it's probably not the most prudent strategy to stake the company future on a continued robust demand for shepherdesses.

As it happened, executives from Lladro were sitting in the audience when Giron delivered a seminar on managing prestigious brands at IESE, the Barcelona-based business school with ties to Harvard. They liked what they heard.

"If we were going to bring in a partner, that partner would have to provide more than money -- it would have to help us grow faster," says Giron.

Lladro, she believes, is in a good position to do that. While Carrera and Lladro hardly target the same customer, they both share the conviction that controlling their destiny depends on owning their own distribution networks. In this, Lladro has a two-year head start--one that can benefit Carrera as well.

With Lladro's capital and real-estate expertise behind her, Giron is plunging ahead with an aggressive strategy to open new stores--five in the U.S., five in the former Soviet Union, and a few more in Spain and Japan for this year alone.

"It's now a completely different company," says 3i's Cruz. "Maria Eugenia has done a tremendous job -- if she hadn't there's no way a firm like Lladro would have been interested in being our partner."

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