Company Spotlight | January 2010
Nu Skin at 25: Growing at the Speed of Innovation
by Barbara Seale with additional reporting by Nancy Laichas
How does a direct seller keep going strong—so strong that it keeps setting records quarter after quarter—for 25 years? Nu Skin has the answer.
Peel away the onion layers that include scientific research, effective products and international presence, and at the core of it all is one pervasive word that shows that the company constantly reinvents itself and nourishes the infectious excitement that surrounds it. The word? Innovation.
You could feel it throughout the company’s international convention, held in late October—that electric sizzle that runs through a group of people who all know they’re part of something really special. Some 12,000 distributors from the company’s 48 international markets celebrated a quarter century of success, buzzed about the new Wealth Maximizer compensation plan and flocked to product stores to buy more than $15 million in ageLOC™ products during the convention. Experienced distributors expected big announcements at the convention, and they heard them, including the news that despite a ruthless recession, the company had just declared yet another quarter of record-breaking financial results. But the news that ageLOC science could actually turn back the hands of time created a record-breaking launch. It was the latest peak experience in the quarter-century life of a company with a mission “To be a force for good in the world.”
|Nu Skin executives celebrate the repurposing of the Nu Skin Enterprises Center for Anti-Aging Research scientific laboratory with a ribbon-cutting ceremony. Left to right: Mark Bartlett, Ph.D., Vice President, Global Research and Development for Nutritional Products; Helen Knaggs, Ph.D., Vice President, Global Research and Development for Personal Care Products; Joseph Chang, Ph.D., Chief Scientific Officer; Truman Hunt, President and CEO; and Scott Schwerdt, President of the Americas, Europe and
South Pacific region
|Truman Hunt||Scott Schwerdt|
It all started with a group of entrepreneurial friends wanting to create a company that could transcend the objective of simply making money. Of course, they wanted their business to be financially successful, but they also wanted it to help others attain financial freedom. And they wanted to do it all in a way that was unheard of—with a product line that included only beneficial ingredients and no potentially harmful fillers. To top it all off, they wanted to direct proceeds from that amazing company to improve the lives of people around the world—especially children—who would never be touched by the products themselves.
Every goal was from the heart, and each was steeped in innovation. Products, for example. The “all of the good, none of the bad” product philosophy was so unheard of that manufacturers were skeptical.
|Distributors gather in Nokia Plaza in Los Angeles for a street party on the final night of Nu Skin’s October convention.|
“It was really difficult getting that first batch of product made because we didn’t have any money,” says Blake Roney, now Nu Skin’s Chairman of the Board. “We were calling manufacturers, asking them if they could make a product with all these ingredients, and they would say, ‘Nobody puts all those ingredients in their products because it would be so expensive.’”
But Roney and his fellow founders persisted, finally finding a manufacturer willing to make and ship the products COD. Founder Sandie Tillotson, now Senior Vice President of Nu Skin Enterprises, brought her network marketing expertise to the table, helping the others see that a volunteer workforce of distributors could set the products apart from the competition. To begin with, the founders themselves invited people into their living rooms and explained exactly what made their products different.
“The very first product we demonstrated was the facial lift system,” Tillotson says. “We would apply it to one side of the face during a meeting, and we would talk to them about the benefits of the product. Once we washed it off, we would point out the differences. We’ve always prided ourselves that our products really create a visible difference.”
That approach launched the company’s trademarked tagline, The Difference. Demonstrated.™
Another early key management philosophy: Distributors drive the company. “Blake [Roney] said early on that the company simply needed to get in the distributors’ back draft and support them,” says Scott Schwerdt, President, Americas, Europe and Pacific, who has now been with the company for 22 years. “So Nu Skin has invested resources and done the right things to empower leaders and make sure that distributors recognize that this is a partnership. That’s what has made us successful over the years. It’s not about the company driving the business. Leaders drive, supported by the company and innovative products.”
Nu Skin products have always placed the company squarely in the anti-aging marketplace, but ageLOC science made it the category leader.
Just six years after the company started and gained traction in the United States, it expanded internationally, first into Canada. As managers prepared, they reached another key decision. They would make building an international business seamless. They introduced a global compensation plan that allowed distributors to build an international sales network while receiving a single check in the distributor’s local currency. As simple as the idea sounds today, Nu Skin was the first company to do it.
“At that time in the industry, if a distributor wanted to build outside their own country, they had to start over. Nobody had made it seamless before, and it took a leap of faith,” Schwerdt says. “When Nu Skin went into Canada, we made it an extension of your business, regardless of where you were. It was an important milestone that allowed us to grow significantly in all markets around the world. At that time, it was an incredible innovation and a huge effort on the company’s part. Now, the industry has followed suit, but that decision was clearly one of the milestones that allowed Nu Skin to achieve our vision of being a world leader in direct selling by paying distributors more.”
Soon the company set its sights on Asia, starting with Hong Kong and Taiwan. This year Nu Skin Korea was honored as the “Most Innovative Company in Asia” at the International Business Awards ceremony.
Today, the company operates in 48 markets and has created nearly 650 million-dollar earners among its distributors—a number that is accelerating. Its more than 750,000 distributors sell about 200 products in the anti-aging, personal-care and nutritional supplements categories.
Today the company operates in 48 markets and has created nearly 650 million-dollar earners among its distributors—a number that is accelerating.
Whether the company’s products are used inside or outside the body, they all have three hallmarks: They’re backed by science and clinical studies; they contain only beneficial ingredients; and their effectiveness can be demonstrated by Nu Skin’s distributors. The company created several groundbreaking inventions to ensure that it could demonstrate the difference.
“Demonstrability is the minimal hurdle,” Schwerdt says. “Distributors demonstrate that we’re different, and they have several ways to do that, depending on the product. For example, for nutritional supplements, they might use the Pharmanex BioPhotonic Scanner. It was the first way anyone in the industry measured antioxidants without taking blood. It measures the levels by measuring how light interacts with skin. The Galvanic Spa can be demonstrated by having customers use the spa on half of the face and then comparing it to the other half. For some products, clinical studies prove their efficacy or we hold patents on the ingredients. Every product is differentiated in a way that can be demonstrated.”
Nu Skin products have always placed the company squarely in the anti-aging arena, but ageLOC science made it the category leader, letting it offer something that no other company could—products that have the ability to reset the body’s aging mechanisms to restore youthfulness.
ageLOC science targets not only the signs of aging, but also the sources of aging by identifying groups of genes—Youth Gene Clusters—that can regulate how we look as we age. ageLOC science supports resetting these Youth Gene Clusters to their youthful patterns of activity. Soon the science will even be available in Nu Skin’s nutritional supplements, but, already, distributors offer the ageLOC Transformation set, a four-product, comprehensive skincare system that cleanses, purifies, renews, moisturizes and reveals younger-looking skin in up to eight ways, beginning in just seven days.
Nu Skin President and Chief Executive Officer Truman Hunt says that ageLOC was the biggest global product launch in the company’s history, with salesforce enthusiasm for the product creating unprecedented demand and sales exceeding its most liberal revenue projections. “Our platform for growth is ageLOC, and given the response we’ve seen, it’s a very, very compelling platform that I think will distinguish us for several years,” he says. “The ageLOC strategy and the notion of attacking the sources of aging today really is what the whole antioxidant story was 30 years ago. You know, 30 years ago, antioxidants were new; today, everyone talks antioxidants. Thirty years from now, ageLOC will also be the way the rest of the world attacks aging. We just have a great head start.”
Nu Skin Chief Scientific Officer and Executive Vice President of Product Development Joe Chang, Ph.D., clearly spells out the business opportunity. “We’re hitting the right demographic: baby boomers,” he says. “None of us want to get old. ageLOC is not about making you live up to 120. ageLOC is really about helping you live as long as possible, while being as healthy as possible.”
Nu Skin develops cutting-edge scientific advances, such as ageLOC, in part through its Pharmanex subsidiary. Since Nu Skin acquired it in 1998, Pharmanex has become a global leader in the nutritional industry, applying pharmaceutical and scientific measurement technologies to create superior nutritional supplements worldwide. Some 75 scientists provide high-level scientific research and development capabilities. They multiply their abilities by collaborating with noted scientists from around the world, representing such institutions as Harvard, UCLA, Columbia, Duke, Purdue, Peking University Health Science Center, Shanghai Medical University and Peking University. Nu Skin distributors benefit, since they sell skincare and personal-care products with the Nu Skin brand, as well as supplements from Pharmanex. And advances such as ageLOC transcend both brands.
Nu Skin will continue its anti-aging research through its internal resources, as well as through three important affiliations it unveiled at its convention.
The company announced key research partnerships with Stanford University and LifeGen Technologies. Nu Skin’s agreement with Stanford aims to increase the understanding of fundamental aging mechanisms in humans by translating insights from basic science into human application. The agreement also includes access to Stanford’s expertise in dermatological clinical trials.
Nu Skin will also collaborate with LifeGen by leveraging LifeGen’s proprietary methods regarding gene expression profiling and pathways affected by aging. The mission of LifeGen Technologies is to discover the genetic basis of the aging process, with the ultimate goal of increasing a healthy life span. LifeGen’s pioneering research has resulted in several pending patents. Ongoing research undertaken in collaboration with Nu Skin is expected to yield further important intellectual property. LifeGen’s patent for the use of gene expression profiling as a method to measure the progression of the aging process at the molecular level in individual organs is expected to be a key component of the partnership.
To underscore its focus on anti-aging science for development of both personal-care and nutritional products, the Nu Skin and Pharmanex labs have been renamed Nu Skin Enterprises Center for Anti-Aging Research. The company combined its scientific advisory boards to create the Nu Skin Anti-Aging Scientific Advisory Board, with the addition of two key scientists from LifeGen Technologies and another from Stanford.
After such a strong convention and response from distributors, Nu Skin even raised its fourth-quarter 2009 and 2010 guidance to investors.
“Based on the momentum we’re generating in our business, we now expect annual revenue to be $1.31 to $1.32 billion,” says Nu Skin Chief Financial Officer Ritch Wood. The company also announced 2010 annual revenue expectations of $1.37 to $1.4 billion.
That followed a record-breaking third quarter and an announcement by President and CEO Hunt that the company’s goal is to reach a 5 percent share of the direct selling industry across all its markets. “Blake wanted to define our success by our commission payout as opposed to our top line and our bottom line: How do we get to $2 billion a year in commissions?” Hunt says. “That requires $5 billion in revenue in our compensation model. Five billion dollars in revenue represents roughly 5 percent market share in the direct selling industry.”
Hunt says some markets, most notably Hong Kong with its 27 percent market share, have already surpassed that 5 percent mark. “We know that 5 percent market share is a possibility. We’re there in Taiwan and also there in Singapore. In Japan, we need to be twice our current size to get there. In Korea, we need to be three times our current size. In the United States, we need to be seven times our current size to get there. But we can do it. There is no reason why we can’t do that in each of our geographic markets.”
Schwerdt says that such aggressive goals are nothing new for Nu Skin. “All of us want to make sure that the vision of who we are and will be is in the minds of all our partners,” he says. “We talk about lofty visions of our future, but in any goal setting, you shoot where you aim. Our aim is the ceiling, and that’s where we’re headed.”
The Heart of Nu Skin
From the beginning, Nu Skin founders wanted to make the world a better place. They found that by improving the financial health of distributors who offer the company’s exemplary products, they could create wealth that could be directed toward wellness and environmental philanthropy.
|Steve Lund||Sandie Tillotson|
To effectively manage and direct its philanthropic efforts, Nu Skin established the Force for Good Foundation in 1996. Since then, it has granted more than $18.5 million to improve the health, literacy and economic situation of children in more than 50 countries around the world. Nu Skin covers all administrative costs so that 100 percent of donations go directly to projects.
Nu Skin’s efforts have improved millions of lives. The Nu Skin Force for Good Foundation, together with the Nourish the Children initiative, has fed hungry children throughout the world, taught sustainable farming methods in drought-stricken Malawi, funded research to find a cure for the devastating pediatric skin disease epidermolysis bullosa, and helped improve the environment and provide education in island communities.
“We like to work with grass-roots projects that bigger foundations don’t have the time or manpower to support,” says Sandie Tillotson, a Nu Skin founder and Senior Vice President of Nu Skin Enterprises. One of her favorite roles is being an ambassador for the Force for Good Foundation. “We like to support people who have made a difference and need money to make their dream come true.”
One of the projects is the Epidermolysis Bullosa Medical Research Foundation (EBMRF), a volunteer, nonprofit foundation dedicated to helping medical scientists learn more about EB, its causes, the development of successful treatments, and, ultimately, its cure. Nu Skin partnered with it after EBMRF Founder Lynn Anderson came to Nu Skin’s office.
“She had lost two children to the disease,” Tillotson says. “She has made it her life’s mission to find a cure, and she is doing that with the help of the Stanford School of Dermatology.”
Nu Skin funds its projects through the sale of products and donations from distributors and employees. At the Force for Good Foundation’s fundraising gala, held during the October convention, distributors and guests bid on a variety of donated items—including Nu Skin Chairman Blake Roney’s custom Harley-Davidson—raising about $750,000 in one evening.
Why such generosity? Nu Skin Founder and Vice Chairman Steve Lund says the company’s culture of giving is one of the very things that attracts—and keeps—distributors. At the Nu Skin convention, Direct Selling News Managing Editor Nancy Laichas spent a few minutes with Lund discussing why giving back fosters a more passionate salesforce—and is just good business.
NL: Why has Nu Skin placed such emphasis on creating a culture of giving?
SL: For 25 years, we have been very actively pursuing ways that we and our distributors can represent a Force for Good in the world. For many companies, a charitable activity is a campaign and not a strategy. In 25 years, I think we can make a pretty compelling case that we’re not going to stop tomorrow.
But there is another reason we got into the charity business. Selling may be the hardest way to make a living; it’s difficult for people to stay motivated. You do all you can to cause your distributors to feel a sense of home about your business. If all we are doing together is making money, then their loyalty is just a nickel deep—only as deep as the financial reward. But if distributors belong to something they believe in that enriches them in other ways, you attract people who have a passion for the business rather than simply an affection for the money that they earn through their business.
NL: When a distributor gets behind a cause, what happens?
SL: We learned early on that people will do much more for a cause than they will do just for money. They will work through hard days and months when things aren’t going as well as they want. When they might otherwise quit, they’ll stay aligned because we are doing good things. We really believe that the charitable work that we do translates in a very real way into our success financially. Our people stay longer, they are happier, they work harder and they are more passionate because they believe in what we are doing. effort. The Nu Skin model demonstrates that you really can do well by doing good. Involving the human dimension when you build your business plan is just good business.
NL: We’re in a difficult economic climate, yet the $750,000 raised at this year’s Force for Good Foundation Gala was a record-setting amount for the event. Why do your distributors keep giving, even when times are tough?
SL: The people who are drawn to our business tend to be very generous. We don’t think it’s our place to try to talk them into giving more money than they are comfortable giving. In good financial times they are very generous, and in bad financial times they are pretty generous, but they do what they can do all by themselves.
Remember, part of our Force for Good model is the Nourish the Children program, which is not a charity; it’s a for-profit activity. We encourage people to buy a bag or two of VitaMeal and donate it to a charity. Distributors earn commissions for purchasing the product and encouraging other people to purchase and donate the product just the same as they would as if they were selling lotion. So, somebody who can’t really afford to do very much charitable giving can still participate and feel like they are part of the Force for Good effort. The Nu Skin model demonstrates that you really can do well by doing good. Involving the human dimension when you build your business plan is just good business.
Behind the Science of ageLOC
At Nu Skin’s October 2009 convention in Los Angeles, Direct Selling News Managing Editor Nancy Laichas had the opportunity to spend some time with Nu Skin Chief Scientific Officer Joe Chang and discuss what makes Nu Skin’s ageLOC product line a breakthrough in the battle to combat aging.
NL: Tell me how Nu Skin develops its anti-aging products?
JC: If you look at Nu Skin over the last 25 years, we have always used science to develop our products, based on the premise that we must know the mechanism of how that particular product works or the mechanism of the ingredients that we incorporate into the products. We’ve accumulated a lot of knowledge, and every time we’d go back and reexamine that mechanism that we first started off with, it’s usually downstream. It’s either affecting a protein or it’s affecting a degree of enzyme that destroys the elasticin and collagen on your face. It’s always something to do with a protein-related kind of molecule.
NL: How did this knowledge lead to the development of the ageLOC product line?
JC: Since 2003, we’ve known that all the proteins come from genes. But we couldn’t get our arms around the genes, because until 2003, nobody knew what the genes were. How many genes do we have that make you who you are and what you are? Nobody knew until the human genome sequence—I still feel that was bigger than landing on the moon. Fundamentally, we now know how the human body is put together. We’ve got a gene map—20,000 cities you can go visit, so to speak—to find the ones that are really related to aging.
NL: How did that research lead to ageLOC?
JC: We had the bull’s-eye, and now we could go hunting for gene clusters that affect aging in skin tissue. We found four gene clusters that each are linked to certain benefits on the skin and know what they do if they don’t behave properly. What does your dermatologist tell you? Moisturize, moisturize, moisturize, right? We found the genes that regulate moisturization of the skin. The second gene cluster we found is related to lines and wrinkles—the destruction of elasticin and collagen. Another is associated with pigmentation and blemishes.
NL: How can this science be used to combat the effects of aging in other organs?
JC: It’s going to take a lifetime to look at every single gene and figure out those that are related to aging. We have found the gene clusters that are responsible for youthfulness. So we’re trying to go figure out how to reset those clusters in other organs. Ultimately, what we really want to do is develop a supplement that can help you live longer.
NL: As a scientist, what does ageLOC mean to you personally?
JC: I spent the first half of my career in the pharmaceutical industry, and I was fortunate enough to contribute to the development of three significant drugs—one for brain tumors, one for arthritis and one for organ rejection. When I look back, that was really satisfying personally, but those drugs only helped a very specific population. For those people, it was one of the most meaningful things I could give them, but with ageLOC, we’re talking about helping everybody, regardless of creed, regardless of gender, regardless of age. I think ageLOC is cool. The potential is so great that everybody can derive the benefit.