After graduating from West Point and leading a successful career as a Black Hawk helicopter pilot and Army Captain, Leo Rinaldi set his sights on private industry. Leo started at McKinsey before transitioning to senior strategy roles at Wells Fargo and JPMorgan Chase. He is now a partner at a boutique financial institution advisory firm. A few recurring themes of Leo’s career have been leadership and the culture of innovation, which dramatically shaped his time in both the Army and at JPMorgan Chase. Building on his expertise, Leo recently published his first book, titled Leading Innovation (available on Amazon), which memorializes the best practices of today’s most effective innovators.
RJ: Leo, really appreciate you joining us. Maybe what you could do to kick things off is just share a little bit about your background. We have known each other for quite some time and I’m really impressed with what you’ve done over the years. Now you’ve written this book, Leading Innovation which is very insightful. I read numerous books each year in the business and strategy space and this clearly stood out and it was a very easy read. The takeaways are something that I continue to think about as I go about the business of investing in companies. Let’s start with your background because it helps sets the stage for some of the insights you will provide.
Thanks a lot, RJ, and appreciate the compliment. I know we’ll talk more about the book in a second. I’ve also been very impressed watching you over the years as well, going all the way back to when we met at the Cornell MBA program. A little bit on my background, I went to West Point in 1997. I’ve been interested in leadership topics for 20 plus years. I went to West Point with the idea that I wanted to learn about leadership, graduated and became a Black Hawk helicopter pilot and was eventually a Captain in the Army. I held a lot of leadership positions during my time there. I eventually got an MBA and that’s when we met of course. After my MBA I got into business strategy and worked primarily with financial institutions. I joined McKinsey in their Financial Institutions Group and stayed there for four or five years, eventually becoming a manager. After that I went into industry. First, I was at Wells Fargo in wealth management strategy and then spent several years at JPMorgan Chase. At Chase I had a number of different leadership roles. I was the Head of Consumer Banking Strategy; I was the Head of Distribution Strategy and also the CFO of the branch network. I eventually left Chase and I’m now a partner at a firm called Novantas that focuses on consulting for financial institutions. I lead the firm’s retail banking practice.
RJ: Fantastic. One of the things that really caught my attention in the book is that you draw on examples from the organizations that you worked at. I’m trying to fit this into your framework, but you give a really great example of Jamie Dimon. Maybe we could start there in terms of examples because I thought that was particularly interesting.
That will actually tie into the thesis of the book as well, which I’ll articulate as I go through the Jamie Dimon example. I also have first-hand experience under Jamie’s leadership. I was a couple of levels down in the organization, but I was able to watch him operate, watch him speak. The culture he created permeated Chase. The example I cite is basically that, after the financial crisis, he’s the only big bank CEO that survived. Wells Fargo, one of the other largest banks in the US, lost their CEO and Bank of America lost their CEO. Jamie himself had a major crisis; it was called the London Whale crisis where Chase experienced a multibillion dollar trading loss due to failures in risk management. The bank wasn’t managing risk well in this particular area and a trader was gambling with the bank’s money – it was a trade that ended up being doubled and tripled and quadrupled down on, and the bank lost billions.
Jamie could have easily lost his job. He was dragged in front of Congress. There was an enormous backlash. The difference between how he operated and how some of these other CEOs operated was he reacted and adapted very quickly and very aggressively. There are also some details in the book about how he changed the way he operated, how he curtailed executive compensation below him for those who were responsible, how he fired responsible parties. We had basically changed the whole culture of the bank by the time all was said and done. He was willing to say in front of very public audiences, including the US Congress, “Hey, we screwed up. It was a huge mistake and we’re going to fix it.” It ties into the broader theme of the book which is that change is accelerating. In order to succeed in the new environment, leaders have to become more flexible, more adaptable, and drive to be at the forefront of change as opposed to holding back and resisting it.
RJ: What struck me the most, and I think other leaders will point to this as well, is that integrity is paramount. I believe it is Buffett who says that the three things he looks for in people are intellect, energy and integrity, with integrity being the most important. It was particularly insightful to see integrity as part of your framework in the book even though the conversation mostly focused on innovation.
A lot of people don’t think about the role of integrity in innovation. You don’t think those two concepts are related. What is integrity really? It’s a dedication to the truth. It’s saying, “Look, if we screwed up we’re going to admit it.” If certain factors surface that are counter to what we expect, if we’re not getting the results we expect, we’re going to change things. If something’s not working in the way we’re treating our employees or our customers we’re going to change that. Integrity is very deeply related to adaptability, because a lot of times you see a lack of integrity in individuals who try to hold on to poor decisions they have made in the past. They’re trying to cover up for it, they’re trying to sweep it under the rug instead of surfacing it, saying, “Look, this is a reality that I don’t like, but it is a reality. How are we going to change and adapt to that?” Integrity and innovation are very intricately related.
RJ: One of the other things that I distinctly remember and think about fairly regularly is your description on how to frame an argument. You would ask certain questions and set up messaging to appropriately frame a topic. It would be helpful to hear more about how you effectively communicate with people.
Part of what I try to lay out in the book is that solely envisioning a new strategy, idea, or concept is not by itself enough. You need to be able to influence others to change along with you, whether it’s getting employees to join or getting investors to invest in your concept or getting customers to sign up for something new. Within that framework there’s a recurring way that you tell the story of change. Those recurring elements are situation, complication and resolution. The idea is that “situation” grounds people in the, “Where are we today and why?” If you do it properly it reduces defensiveness. In other words you don’t want to come at people saying, “Hey, we have to change things because what we’re doing today is really stupid.” That tends to generate a lot of resistance. Instead what you want to say is, “Look, it’s perfectly logical how we got to where we are today.”
If “situation” describes the way the environment used to be “complication” describes how things have changed. There’s a new competitive situation, there’s new technology out there. Customers are demanding something new. What we used to do isn’t good enough anymore.
The final step is “resolution.” You can bring a lot of facts to bear in all three of the argumentative areas. However, framing it as a story makes it very easy for people to digest. People love stories. People have been telling stories around the campfire for thousands of years; our brains are wired for it.
RJ: A lot of the folks in our audience are executives of private companies or investors. I think that in almost any business situation, the way you communicate is extremely important. That’s why I wanted to quickly touch on how you frame things. Now that we’ve covered communication skills as well as the importance of integrity, maybe we can go straight into some of the examples you give within the book? Like Jeff Bezos, Steve Jobs, and Elon Musk?
Part of the core thesis in the book is that life and business are accelerating and a key driver of that is digitization. We’re all living it every day; nobody needs to be reminded of how much technology is changing our world. Part of what is interesting about digital technology versus some of the other big innovations—like the steam engine or vaccines or television, any of these things that massively changed the world 50 or a 100 years ago—is that digital technology affects every single industry and every aspect of life. Marc Andreessen famously said, “Software’s eating the world.” We’re all experiencing that, we’re living at the pace of Moore’s law. Digital technology is doubling every 18 months. The reason I chose Bezos, Jobs, and Musk is because they are at the forefront of showing what successful leadership looks like in the digital age. From scratch, each one of them created enormous value that cuts across multiple industries.
We all know the story of Steve Jobs and how he affected computers and music and movies with Pixar. We see it now with Amazon affecting many industries, including cloud computing and retail. We see it with Elon Musk. That’s why I chose them. In the book I asked, “What is the common trait among all of them?” First and foremost it is that innovation wasn’t one of ten leadership skills they possess. It is their organizing principle. Everything they do as leaders is to drive innovation forward. That’s what you have to do when you’re operating at the pace of the digital world – innovation has to be the entire organizing principle of your leadership style. I built my whole leadership model around the patterns that emerge when you organize your leadership philosophy around innovation.
RJ: You start with the founding principle of innovation because, given how fast things move today, complacency kills. Outside of innovation, what should an executive think about next? How do they implement and maintain a culture of innovation?
There’s a process to innovation. Like with anything fundamental and basic in life, it’s very intuitive once you lay it out and you understand it. However, there are details to it and there are ways you can get better at it and eventually master it. The basic process is very simple. First you envision, what’s a better way of doing things? That’s the process of envisioning something new. Second, as we alluded to earlier, how do I inspire others to get behind this vision? How do I influence other people to join me? There’s a great book by Walter Isaacson called The Innovators which argues that this whole idea of the lone wolf innovator is a falsehood. A lot of times we elevate people like Elon Musk or Jeff Bezos or Steve Jobs and you get the feeling that they did it themselves, when nothing could be further from the truth. They have to inspire others on a daily basis. Steve Jobs didn’t even know how to program a computer. He was totally dependent on others to make his vision happen.
Once you have a vision and you have inspired others, you have to execute. This is where my experience in the Army helps. McKinsey was a great place for envisioning new strategies, but they didn’t do much around execution. In the Army, you’re not doing a whole lot of strategic thinking, you’re doing a lot of executing. In the book, I talk about different roles that leaders have to play, but the one other thing I want to stress is that the process of “envision, inspire, and create” is not a one-time trip. You have to keep going around the loop multiple times. One of the fundamental things you see about great innovators is that they go around the loop again and again and again. A simple example is Jeff Bezos who started with selling books on the internet. Did he stop there? No, he disrupted the book selling industry and then the book industry itself by inventing the Kindle and pioneering digital books. He went around that loop again and again. He didn’t stop after one loop.
RJ: Those are great examples. We hear about them in the media all the time, but when you really stop and think about what they did, it’s almost as if they have never stopped challenging themselves and their ideas. When you hear Bezos in interviews, it’s fascinating because he’s thinking five years out. Some of the strategies he plays are well underway and can take three to five years to fully pan out. He’s constantly thinking about the future and the long term. We have covered a good amount and I’d like to leave it to the listeners and audience to go and check out the book. What’s the best way for them to find it?
The best way right now is to go on Amazon and search for Leading Innovation. There’s both a digital and a physical copy you can buy.
Hear the full conversation with Leo on iTunes at the GrowthCap Insights page.