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.
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.”
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.”
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