Health & Medical
Striking a balance
How George DeVries manages risk without stifling innovation at American Specialty Health
By Leslie Stevens-Huffman
Smart Business San Diego | March 2008
George DeVries faced the classic entrepreneur’s conundrum:
How do you add enough structure to support a growing company
without killing innovation?
His solution was part process, part culture.
DeVries, co-founder, chairman and CEO of American Specialty
Health, relies on structure for both.
“I think that one of the things that fostered our growth is the
continued evolution of our new product delivery process,”
DeVries says. “We now develop new products and then deliver
them to market in a very structured way. That delivery structure
has helped us manage our risk, which meant that we didn’t
always have to succeed with a new product in 90 days. We’ve
been able to be patient waiting for new products to catch on, but
in spite of that advantage, success has taken a lot of perseverance. I think, originally, one of the hardest things was selling the
concept of complementary health care to customers before the
customers knew the need even existed. Our success hasn’t been
about risk avoidance; it has been about managing risk. We never
bet the future of the company on just one product.”
DeVries founded American Specialty Health in 1987, after he
had been laid off from his job. Needing employment, he listened to a friend’s idea and formed a chiropractic network
while working from the spare bedroom in his condo. At the
time, the notion of organizing chiropractic providers and providing insurance coverage for chiropractic visits was unheard
of. As it turned out, that germ of an idea was the beginning of
American Specialty Health.
Today, the company provides complementary health care
coverage and services to 13.4 million members for clinical
needs, such as chiropractic care, dietary services, acupuncture
and massage therapy, as well as health education programs for
everything from tobacco cessation to weight management and
disease prevention. DeVries says that the key to growing the
company to $128 million in annual revenue and 600 employees
has been the creation and installation of a structured system
that minimizes the risk of bringing new products to market
while continuing to foster and support innovation.
Develop ideas
While all new products start with a concept, idea generation is
truly the vital component for new product development at
American Specialty Health, simply because DeVries has been
the industry’s trailblazer. He originated the concept for the company’s insurance coverages and educational services because it
wasn’t possible to emulate the competition.
He says that he gets ideas for new products from a variety of
places, and then develops them with the company’s senior
management team into a working document.
“Many of our new product ideas come from the senior-management level in the company, but we also get a number of
good ideas from talking to clients,” DeVries says. “I’ll be out
talking with a client, and they know we’re an entrepreneurial
company, so they’ll offer ideas to me. To get ideas from customers, you have to spend time with them, and you have to listen. Then, I’ll get together with one or two senior company
leaders, and we’ll flush out the idea and create a detailed white
paper. We drill down into the detail in the white paper, looking
at every aspect of the product including the financial implications.
“We’ll look at the consumer trends and the clinical trends to
see if we think there’s a market for the product, although sometimes because the idea is a new concept, there’s no data to support it, so you just have to go on intuition.”
Even though the data to support his ideas doesn’t always
exist, DeVries says that the team rarely disagrees about bringing a new product to market. However, from time to time, disagreement occurs within the ranks, and getting to the next step
requires DeVries to use his consensus-building skills.
“You can create consensus among the team by helping everyone understand how the product will benefit the market and
why it makes sense to bring it forward,” DeVries says. “I’ve had
to develop those skills because I had to sell new concepts to
customers. One of our more hotly contested ideas was around
development of our health coaching program. We had a lot of
people scratching their heads with that one, but now the program is successful, and it’s generating millions in annual revenue.
“That program is an example of why it’s vital to have an entrepreneurial culture. We don’t work in silos, and as a management team, we can make difficult decisions come together
because everyone knows that our company is all about innovation.”
While the senior management team and customers generate
many new product ideas, the entrepreneurial roots of the organization inspire front-line employees to offer up new ideas, as
well.
“In the case of our Silver&Fit program, which is a fitness program for seniors, that idea came from some of the folks in our
marketing department,” DeVries says. “The culture is what creates that type of innovation.”
Structure matters
DeVries credits detailed and structured new product implementation with few launch failures and measured risk reduction. As a
first step in the process, he turns the white paper over to the chief
operating officer, who then builds a key process team composed
of midlevel company managers. The goal of the key process team
is to detail everything that will be necessary to bring the product
to market.
“The key process team looks at all of the deliverables and what
tools and resources it will take to make the product successful,”
DeVries says. “This includes everything from the impact on customer service to the creation of marketing materials. We want to
understand all of the resources and tools that will be required to
support the product and the impact the service delivery requirements will have on our internal team and our customers.”
He says that this detailed look by the key process team helps to
refine costs and avoid financial surprises. His next step assures
that the marketplace will accept the product before the company makes a huge investment of time and resources.
“We sell all of our new products to a few early adopters who
are current clients,” DeVries says. “This is an absolutely critical step before we go live. You can’t risk testing a product with
new customer relationships, so you go to your existing customers. We want to see how the product is going to perform
before we offer it to everyone. This step reduces our risk, and
by staging the implementation, we’re able to postpone the larger costs associated with a wide-scale launch until later on.”
DeVries says that while research and development costs are
fairly low in the complementary health coverage business,
staging the implementation further enhances the cost effectiveness of delivering the product to customers. Also, he can
refine the service delivery process for the product, which helps
to assure quality for customers once the product moves
beyond the beta test stage.
“I’m engaged on the sales side when we make the visit to the
client requesting the trial because it shows the commitment of
the organization to the new product,” he says. “Once the product is established, it’s much easier for the sales team to secure
additional customers.”
Support innovation
Regardless of processes, successful new products are the result
of having people that believe in a culture of innovation.
“One of the ways that CEOs can foster growth and create a
culture that supports innovation is by hiring people who are
committed to the vision and mission of the organization, especially at the senior-management level,” DeVries says. “It’s different managing and creating new products when you’re a
company of three people because you can keep your hand in
everything. But as you grow, whom you add to the team is vital
because no one person can carry a team of 600, so your ability
to assess people for a cultural fit is vital. We hire for character,
enthusiasm and a positive attitude because everything else you
can train. I always say, ‘Hire for character first and what’s on
the resume second.’”
He says that he has no special formula for assessing character
because hiring is not an exact science. However, he favors conducting multiple interviews with a candidate as a way to assess
their character, and he also encourages employee referrals
because current employees will refer friends who are also a
good cultural fit for the organization.
DeVries says that he favors promoting from within and offering upward mobility to employees as another way to nurture
the culture. Internal promotions help the staff feel engaged
with the outcome and more like business owners.
“Creating promotional opportunities for the staff generates
enthusiasm,” DeVries says. “Most of the entrepreneurial ideas
are driven at a very high level in the company, but we wouldn’t
be able to execute if not for the staff that administers the products and supports the innovation.
“One way that I check in with the staff and get a barometer on
the culture is through our annual employee satisfaction survey
and also by monitoring the number of referral bonuses we are
paying to employees for referring their friends for employment
opportunities here at American Specialty Health. I really regard
employee referrals as the true litmus test of whether our culture
is working. When the employees take the annual survey, they are
asked to rank the attributes of the company, and I go through
and read each survey along with their comments. It’s important
for CEOs to listen, and we’ve made some adjustments based
upon the comments and feedback we’ve received, such as
increasing staff benefits. Listening to the feedback and making
adjustments is an important part of maintaining the culture
through the process of growing the company.”
While the culture has remained the same, the structure that
supports innovation has changed and evolved over time and
that evolution has been the secret to achieving growth and success for DeVries.
“We have continued to innovate, but now we handle the
process of innovation in a very structured way,” DeVries says.
“We’ve continued to evolve and create new products, but we
wouldn’t have been able to accomplish any of it without a
structured process for implementing new ideas.” <<
HOW TO REACH: American Specialty Health, www.ashcompanies.com
