Dolce&Gabbana, the Italian luxury fashion brand, has spent nearly four decades offering its figure-hugging, Mediterranean-inspired designs to clients around the world. Today, the brand is busy putting much of its energy into expanding the reach and longevity of its business.

Founded in 1985 by Domenico Dolce and Stefano Gabbana, the Milan-based brand now generates more than €1.6 billion in revenue annually, up 27.5 percent from the previous year. The fashion label—which includes ready-to-wear women’s, men’s, and children’s lines and accessories, as well as Alta Moda (its couture project)—is complemented by other lifestyle categories such as beauty, home, and food and beverage. Its three biggest markets are Europe, Asia (excluding Japan and Korea), and the United States, in that order.

In August 2022, Dolce&Gabbana announced one of its first sustainability initiatives, a joint effort with five luxury fashion brands called the Re.Crea Consortium. The consortium aims to manage end-of-life textiles and fashion products and to promote the research and development of innovative recycling solutions.

Dolce&Gabbana has also launched a series of new initiatives and category expansions to help it compete with some of its larger rivals. In early 2022, the company ended its beauty licensing agreement—a somewhat counterintuitive move in luxury fashion—to bring its beauty business in-house, with plans to consolidate and improve its beauty products and launch a skin care line by 2025. In April, the brand said it would get into real estate, participating in two major residential projects in Miami and Marbella and a hospitality project in the Maldives. All this legacy-building comes after its founders said the business would be passed down to younger family members rather than to an outside entity.

In the first in a series of interviews with Italian luxury leaders, McKinsey’s Gemma D’Auria spoke to chief executive Alfonso Dolce, who is brother to Domenico and has been with the company since the beginning. He discusses the brand’s ethos, approach to talent, and philosophy for attracting the next generation of consumers.

This interview has been edited for clarity and length.

McKinsey: The definition of luxury, which always seems to be in flux, is different today than even ten years ago. What was the original vision for Dolce&Gabbana as a luxury brand and how has that evolved over the years?

Alfonso Dolce: Dolce&Gabbana was born in 1985 out of the desire of two people: Domenico Dolce and Stefano Gabbana. They had both personal and professional chemistry and were lovers of aesthetics and fashion, and so they created a dream based on a clear idea: to give soul to products through know-how and spread the Italian culture of beauty all over the world. The idea is to make people appreciate Italy not only when they visit our country but also when they discover our values through our products. Our customers choose us for a specific lifestyle and to share in a sense of belonging, and also because they know they are inheriting a piece of our history.

McKinsey: Dolce&Gabbana’s founders, Domenico and Stefano, have repeatedly highlighted the brand’s commitment to the “Italian tradition.” What does that mean exactly and how do you blend that ethos with a spirit of innovation?

Alfonso Dolce: Tradition and innovation are two founding elements of Dolce&Gabbana’s thinking. For us, tradition means having the utmost respect for the know-how, the deepest-rooted knowledge of how things were made in our part of the world. When we think about a product, we think about harmonization and how to make each part of it the best it can be so that when it comes together, its parts are as important as the whole. At that point, the product ceases to be just a product and becomes a lifestyle, a dream, a sense of belonging.

Innovation, for us, means making the most of tradition through the humanization of work—meaning people’s work is more important than the use of technology to create it—thus allowing people to work in spaces with technologies that help them add value. Balancing these two worlds in all contexts of business life, from the creative to the executive side, is part of a brand philosophy rooted in the ethical values of being human and of doing, without which a business cannot be built.

The concepts of “Italianness” and craftsmanship are innate elements of Dolce&Gabbana’s culture. Within our cultural framework, Italianness is the highest expression of beauty.

McKinsey: The past few years, even before the pandemic, have brought some challenges for Dolce&Gabbana, particularly when it comes to brand perception and rebuilding a customer base in various markets. What lessons have you learned from these and other challenges?

Alfonso Dolce: Human beings make mistakes, and so do companies. Corporate life is made up of ups and downs, or greater or lesser recognition by the market at a given time, depending on events. We have, therefore, learned to do a daily check-up of our work. We have regular dialogues with local offices that allow us to better understand the needs of each region and market. It is not so much about how to do well as about how to behave well: we want to avoid past mistakes by informing our strategies in the future based on what we’ve learned from those instances.

However, it’s impossible to say that a company will have corrected all the mistakes tomorrow that it made in the past day. There will be new ones, taking shape in different forms and ways. That is why teamwork is important. It is easier to prevent mistakes if there is clear and transparent confrontation. It is OK to be uncomfortable when we’re dealing with mistakes.

McKinsey: Speaking of challenges, finding and retaining talent has been a challenge for the retail and luxury industries. Human capital is a major competitive advantage for luxury businesses. How do you think about making Dolce&Gabbana a company where people want to work?

Alfonso Dolce: It’s important that we keep the person’s human and social needs at the center of doing business. How do we protect and evolve human capital while doing business? By working together toward a common goal, yet with clear responsibilities by departments and according to individual skills. Even if individual skills alone can’t win a game, together, they can win a championship.

For Dolce&Gabbana, our approach to teamwork is to have older generations work alongside the younger ones. Based on the idea that the workshop, as a hub for know-how diffusion, is the heart of fashion, more than a decade ago, we incorporated craft workshops into the company by establishing Botteghe di Mestiere—a professional training course that takes place between masters and young talents. The energy and skills of the new generation, including technological innovation, combined with the wisdom and patience of the masters allow the company to innovate and support the generational transition, protecting all human capital and creating a greater sense of belonging.

McKinsey: We estimate that Gen Z, or those born between 1996 and 2010, will represent a third of consumers by 2030. Despite their age, Gen Zers are eager to purchase luxury products, albeit in a way that differs from how their parents did. How do you relate to these new consumers who might not be able to afford the brand now but for whom Dolce&Gabbana remains aspirational?

Alfonso Dolce: I think it’s wrong to cluster only by generations. A fashion company, which is more about pleasure and beauty than luxury alone, needs to evolve. To do so, it needs to appeal to its most loyal customers as well as future customers, regardless of their age. It is a mistake to remain overly convinced that only one way of working—even if it has proven successful so far—is the right one. It needs to be questioned often. The company needs to evolve to meet the changing expectations of all consumers. If a company or brand wants to outlive its founders or management, they need new stimuli and change.

Gen Zers, however, have so much information and so many options available to them so quickly that it can be overwhelming and keep them from deeply experiencing one product or brand. As a result, new generations are often interested in the fashion and lifestyle trends of the moment. Many Gen Z youth often look for a product they think will satisfy them, but it ends up being disposable. This does not mean that they spend less: in fact, Gen Zers sometimes spend more in total while paying less per item. They seek the initial experience, but they soon realize that quality is what lasts. We want to show them that quality, plus our ethics and values, is what will satisfy them when making purchases.

McKinsey: We also know that even though consumers across all ages are more interested in socially responsible brands and sustainably made products, Gen Z and millennials are the two generations leading the charge. Dolce&Gabbana recently announced its sustainability initiatives. What progress has the brand made since it announced the Re.Crea Consortium?

Alfonso Dolce: The moment people decide to create a company, they have a social responsibility to others—allocating capital, hiring people, and putting themselves at the service of others. We are Italian, and we want to bring Italy to the rest of the world through our craft. Working as a community is true social responsibility. I believe every product has at least one soul within it, and that soul, that passion and love with which it was made, allows it to draw more attention.

We have recently launched our decarbonization program addressing Scope 1 and 2 emissions. We are taking measures to ensure our electricity consumption comes from certified renewable sources. We have installed solar panels across our factories and offices and designed new boutiques in Italy to meet energy efficiency criteria.

McKinsey: Around the time the company announced its sustainability efforts, it announced a handful of diversification plans, specifically in beauty and real estate. How do you expand into other categories responsibly but also in a way that makes sense for Dolce&Gabbana? And where do you see the business going in ten years?

Alfonso Dolce: The market—our longtime customers and new generations—have pushed us to ensure that something new is added to each step of our journey. When we enter new product categories, we first build the atelier by studying and incorporating new people and skills. After that, we slowly introduce the product to the market so that we can give the right experience to the consumer. We have been doing this lately, too, with major accelerations.

During the COVID-19 pandemic, we decided to take on new challenges. Even though Dolce&Gabbana has been present in the beauty segment for 30 years (we launched our first fragrance in 1992), we decided to deepen our beauty offerings. Even though we did not have a home division, our home goods existed in all Dolce&Gabbana environments, like our stores.

In general, before looking at the future, we need to stop and understand who we are, what we are doing, and how we are doing it—maintaining our commitment to responsibility. We’re going to maintain the same values we had when we started the business. You can only offer something of substance if everything is done in the right ways and at the right time.