How Operating Partners Win: Inside Apollo's Playbook with Aaron Miller

Leadership's a function of who you put in the chair, not just for private equity, it's across the board. There's a lot of people that love to be leaders, but there's very few people that love leadership. On this episode of Executive Edge, Simon is joined by Aaron Miller, a private equity legend and partner in Apollo's private equity business. Operating partners are gonna have to become technology enabled.

Technology, I think for a long time in the operating partner world has been something that's been done on the side. Aaron breaks down how consulting shaped his mindset, the evolution of operating partner roles, and how culture, leadership, and technology, especially AI, are reshaping private equity. In the operating role, you can have a board seat, but you're also providing advisory support. How do you kind of balance between those multiple roles in a way that's effective for the portfolio?

You're not balancing the role, you're really fulfilling a certain role. I always frame it as this, when you're the operator, you're responsible for doing all the work and you're accountable for that outcome. Hi everyone, welcome to another episode of Executive Edge. Very excited to have with me an OG, someone who is highly respected and somewhat of a legend within the operator world.

Economy and ecosystem, but very specifically within private equity, Aaron Miller. So excited to have you on, Aaron. Thank you for coming on. Thanks for having me.

For anyone who doesn't know who Aaron is, Aaron is a partner in Apollo's private equity business and the chairman of Apollo Portfolio Performance Solutions, APPS for short. Apollo, again, for those who don't know, It was a very well-known American asset management firm within the private equity industry. Primarily invests in alternate assets with $840 billion of assets under management, AUM. Prior to joining Apollo in 2019, Aaron was the chief operating officer at Catalina Marketing, covering Europe, Asia, and the US.

Prior to that, was the operating director at Berkshire Partners. Aaron spent over a decade at Bain & Company, and another senior partner from Bain & Company, someone I interviewed earlier this morning, another recording that will probably come out right before Aaron's. Early in his career, Aaron also held key product and operations leadership roles with companies such as General Mills, Serial Partners Worldwide, joint venture between General Mills and Nestle in the U.S.

And in Latin America. Aaron served on the board of several Apollo Portfolio companies, which is standard for an operating partner within PE. But some of those companies include McGraw-Hill Education, Tech Data Corporation. Aaron received his MBA from Wharton, University of Pennsylvania, and has BS in chemical engineering.

And anyone who hasn't done that, it is up there with aeronautic engineering as one of the most complicating technical degrees out there. From Northwestern University. And he is also fluent, not just obviously in English, but also in Spanish. And Portuguese.

Thanks again for coming on Aaron. Thank you, appreciate the intro. So your experience as an operator, someone with an operator mindset, you know, consulting with clients, working in operations yourself all around the world, and then moving into the private equity industry. I've got my perspective, but I'd really, really be interested in hearing yours.

Like what did you take from consulting? Really helped in being an operator and potentially what kind of conflicted like what did you have to unlearn from those skills in order to kind of be effective as a as a leader in industry and then in MPE yeah I think there's a couple things my consulting spirit was a little different than most I did the traditional strategy consulting role for about half the time I was at Bain and And I think that was tremendous with respect to teaching me how to structure ideas and to provide deeper thinking around a variety of issues.

Back then, we were all pretty much generalistic things. But I spent five of those years, we created a separate legal entity called Bain Corporate Renewal Group, in which we were turning around distressed private equity assets. And I think that combination really forced me to really think more deeply about how to execute, you being strategic, but at the same time, how to execute with speed. And the phrase common phrase i use now people's running water through the pipes it's sort of how do you quickly develop a strategy but then quote-unquote run the waters through the pipes even in your head and with your teams so that when you start to execute you have a tremendous amount of confidence that you can execute with speed and accuracy and i think the combination of those two experiences where you know i got to serve as a coo of a couple of companies during that time that were private equity owned, but in very difficult financial straits.

And at the same time, working with years before and years after large clients with strategy issues that required a little more deep patience and deeper thinking, I think the combination for me was unique and prepared me well for private equity. And in your roles that you've had recently as well, there's quite an interesting dynamic within... Being an operating partner, right? Because if you're a board member and it's a public company, perhaps there are certain roles, right?

You don't generally take to be an investor. You've been hired into that board position. You could be a consultant, a senior advisor. You're then also independent.

In the operating role, you can have a board seat. You can be connected to the team that made the original investment decision and perhaps decisions for later capital injections, but you're also providing advisory support to the C-levels to help them through some challenges that they might be facing. How do you kind of balance between those multiple roles in a way that's effective for the portfolio? Well, I think the first part for me, and I think this has developed over the course of time, I think the roles, you're not balancing the roles, you're really fulfilling a certain role.

And that I think there are operations roles, and I always frame it as this. When you're the operator, you're responsible for doing all the work and you're accountable for that outcome. If you're an advisor, you're just responsible for doing work and giving advice. I see the operating partner role as what I call a steward.

You're accountable for the outcomes. But if you do no work, hypothetically, hypothetically, no, I mean, it's not that people are looking for a deck from you. They're not looking for a set of materials or a set of analysis from you. They're looking for an outcome.

And so you orient yourself in the operating partner role towards the outcome more than you orient yourself towards the advice. At the same time, you have to acknowledge that the operator is responsible for delivering that work and you're jointly responsible for the outcome. And I think when you step back and view it that way, you're not really striking a balance. You're letting all the players in the ecosystem play the role that they're supposed to play.

You have a part, they have a part, and then let's not forget investment teams because investment teams have an oversight role in many regards, and they ultimately are responsible for the outcomes even at the same level as the management team and the CEOs. So once you understand that balance, then it's a matter of where do you fit yourself in and where can you add the most value and i think most of the time for me it's been a little much heavier leaning than purely advisory when i'm actually in the operating partner role and so i don't i don't find it difficult and i think people who really understand that this is what this job is don't necessarily find it that difficult either and has has that approach and then also the structure of as apps has has how's that evolved since you first got involved?

Is that the significantly larger teams of the arm's length versus accountable kind of approach to oversight and support for the Portco's changed? It hasn't really. I think what's changed, the team has clearly grown. When we started, we had a team of five people.

Most of those individuals we've had to, over the course of time, switch out. And so we have a team of 35 to 40 today. The team has really, the ethos and the psychology around the team hasn't really changed. We truly attempt to be partners to both the management team and to the investment teams.

and the phrase we often used was it's a climber guide relationship. We are the guides. We have, whether it's technology expertise, it's operations expertise. It may be that we have expertise in certain areas of talent, or we may be generalists that help guide the team.

But our job is to guide those executives up the climb and to put them first along with the investment team. And that ethos has remained today, which means we've had really highly, highly talented operators in our team across all sectors. Generalists, technology, talent, sourcing, but all who come to the table with this idea of being guides to others that are climbing. And I think that has been the common thread throughout.

I think that also allows us to lean in a little more because we understand that we are not necessarily the ones that are responsible at the end of the day for making it happen but gosh darn it we better make sure that others are as prepared as possible to make that client so that that has not changed at all team is bigger functions we have eight functions today versus starting with one two. And the team now works in an integrated fashion. So if we need to address a really complex ESG issue, it may be that we're doing that in coordination with our data team.

Or if we have a complex sourcing issue, that it may be our technology and our generalists who are working together in an integrated fashion. That has remained the same since day one. For me, it's a fascinating difference really behind private equity as a source of capital versus, you know, all the other groups out there, right, from venture capital to just traditional funding and banking. You know that added value that aligned interest right vested interest and also the leveraging of expertise within the advisory operating partner group that model i think is you know one of the reasons that private equity is has grown from you know straight to strength in the last few decades and especially the operating partner role and group you know has grown as well i mean we were reminiscing before we hit record about, you know, conferences like private equity, international PEI, right?

I don't know how many other, how many years ago it was when you first attended that operating partner conference, but, you know, significantly smaller than it, than it is now. And that's, I don't just, not just a reflection of how well those guys have done building up a great conference, but also just a reflection of the growth in the industry, right? I think the industry officially probably started in 2001 with the creation of Capstoke. Which is KKR's group.

Prior to that, there were other, there were operating partners. Bain and Company had them. Carlisle had them, but formally established. And I say that we went through this progression over the next 20 years in which early on in those 2000s, there was more players in the NBA than there were operating partners.

Sort of take 12 players and multiply by 32 and you get the number there. And then you progress towards the end of the decade, but you still had more players in Major League Baseball. You sort of take 30 there, 30 cities multiplied by 26, but there were still more players in major league baseball than there were operating partners. And you probably progressed to around, you know, nobody knows exactly, but 2015, where at that point you crossed, and it's really incredible.

The number of players in the NFL and operating partners were somewhat in the same ballpark as, you know, 15, 50 times 30, about 1500. Now we've exploded to thousands and thousands of operating partners, but the industry as it's formerly been established is still 25 years old, but didn't really explode until the last five to 10 years. And so it's really interesting when people think about it as this established entity that exists forever, but it's incredibly young. It's marginally older than Facebook.

So, or meta as we want to call it. So it's, it's not that old. Yeah. I worked with, I don't know if I think of the names, but you know, Todd Cooper, Adam Fless back at Capstone.

I don't want to say 20 years ago, probably 18 years ago, but that was really my first foray back when I was 80 into the operating partner world and what that group meant within a private equity organization. These guys really cared. They were really there to partner with the firm. Everything they were doing was focused on results and being effective they cared about you know just extremely authentic and and a very fast paced moving but you know but respectful um mindset was just yeah it really really changed my my view you know all those years ago and both great guys as well let's let's step back a little bit just just to you because i think you know beyond the role and the industry that you work in i think you know your background is is is impressive and fascinating enough as well let's talk about the being multilingual as an example i mean i know that you've traveled all over the world but how's that helped you i mean is that Were you naturally fluent in Spanish or Portuguese, or is that something that you've kind of picked over the last few years?

And have you used that to your advantage? I mean, it's... I don't know if anybody's naturally fluent unless you're born or raised in an environment, and I was not. I was...

I'm an English speaker. I think the only thing I had was... My parents were Jamaican. At least we came from the same, I guess, kingdom, you and I, at one point in time, for lack of a better word.

But my parents were Jamaican. And I took an interest in Spanish probably when I was at General Mills. It led me to pursuing a role in Mexico. Pursued the role.

Wound up in Mexico turning around plants. It's where I happened to also meet my wife. I immersed myself culturally. And I think the same thing when I went to Brazil.

I spent some time at the Lotter Institute at Wharton, the AMBA program there. And that's where I learned Portuguese. But I think, you know, when you, you learn a language, you have a choice and you're either going to learn the language devoid of the culture. You're going to learn the language and understand the culture, or you can learn a language and you can become part of the culture.

And I think the times that I spent in definitely in Mexico for a time, and I became part of the culture. I immersed myself in ways that I probably didn't anticipate. I think when I went to Brazil, I understood the culture. It was a shorter period of time that I was there.

But both of those experiences made me far more empathetic when I came back to work in the United States. And it made me a more effective leader because I started to understand that my point of view wasn't the only point of view. And not only point of view, my paradigm, the context in which I saw things wasn't the same. And when you start to think about the context that others live in and the context, even within your own country, even within your own quote unquote home, it allows you to see problems in different ways to lead people, I think more effectively, but also to develop organizations more effectively.

And I think it's been critical for me, that experience in Mexico, in Brazil, and then subsequently, you know, running teams across Asia and Europe as, as made me a stronger, much better leader. So it goes far beyond the question of language and extends into the question of culture. I hope, right, with, you know, the speed at which translation tools are evolving and getting better and, you know, to use your meta reference, there'll probably be, you know, translation embedded into the Ray-Ban meta glasses to the point in which you'll just be able to, I mean, I even think that testing, beta testing, some of this now, you can hear another person talking in a different language and it will provide a transcript, you know, on the lens and the screen.

that allows you to see that. The danger of that, even though it does... Kind of streamline communications and allows people to you know to communicate more effectively quickly maybe you lose a bit of that magic right of actually forcing yourself to be you know embedded you know and kind of learn from scratch and maybe even learn the meaning behind some of the words and and the pronunciation that allow you to see to see their culture from from their side and maybe hold back from not feeling you need to integrate and and actually travel to that location i mean do you think that there's a there's a danger that people or lose that edge that you picked up from learning the language from scratch and without growing up in the native town?

Look, I think it'll always be a choice. I think it'll depend on what you're trying to do. I think there's going to be definitely a place. I think people who are going to be able to fly out of country and sit and engage in a dialogue with a group of native speakers when they may be the only native speaker, I think that's going to be incredible.

I still think there are people that will make the choice to immerse themselves culturally elsewhere and understand the nuance of a culture far beyond the language. And I think that, I don't think that can ever be lost unless we become monolithic culturally worldwide, which pretty tough for that to happen. I think you'll always be able to make that choice in terms of how much do you want to grow as a person. And I don't see that ever ending.

I read something, I'm not going to be able to quote the exact statistics, but there is thousands of languages that are still practiced today. And it's like 90% of them are spoken by like less than, I don't know, 200 people. So that to me is just mind boggling, right? Just outside the main languages that everyone operates in today.

But to your point that, you know, there are still similarities across culture and it's tapping into those respectfully and with, you know, with empathy that allows you to see things from their point of view and, you know, and hopefully be more effective in operations, which I think is cool. So, I mean, you've lived in a lot of places around the world and I'm sure traveled as well with work. Is there a certain part of the world that you might... Retire to or is there a place that you you're really fond of that you go back to on a regular basis well i mean like most people think i already live in atlanta i'll probably retire to atlanta but okay i'm most fond of rio de janeiro okay the experience in rio it was fun most people might think i know why i lived rio but it really was i think a place that challenged me culturally challenged me artistically it challenged me on every single dimension you could possibly imagine and really diving into Rio and all that it was.

It's a place that's so rich in history. Many people think of it as Carnaval or think of it as beaches. And it's so rich in terms of history, in terms of, you know, everything you could possibly imagine. I was fortunate enough to spend a semester there studying philosophy and supply chain, if you can think both of those at the same time.

And I think I will never forget that experience. And in addition to doing a couple of deals there around the document storage business early in my career. So, and then working on an airline there. So I've been to Brazil so many times, but I've actually had a chance to live, work and study in Rio, which is other than the United States, the place I've done all three.

No, that's fascinating. So are you at some point going to do guest lecturing? Is that something that professors will reach out to you on? I mean, I think you'd be fantastic at it, but is it, you know, is that, is that a desire at some point or?

It's something I already do. So I'll be at Wharton next week. That's next week. I do some small sessions at Harvard once a year.

I do probably three or four sessions at Wharton every year. And, you know, we'll see how that goes over the course of time. We never know where life takes us. I do enjoy it.

And I think I enjoy being attached to individuals or having the opportunity to be in front of individuals who are hungry to see a different perspective. And so that time at Wharton has been increasingly fun each year that I do it. And we'll see what that ends up happening over the long haul. Which professor's sessions are you generally guest lecturer in?

Have you bounced around, or is there one? I have bounced around most recently Professor Burku with private equity. Yeah, of course. That makes sense.

Students are very lucky to be able to get you to... Listen, here you speak in real time, be able to answer questions off you. I know a ton of them, at least on the East Coast, getting into private equity or at least they have that as a target career path and you know there's a lot of anxiety around how that might evolve and you know the opportunities etc and so i can i can imagine it's a well-attended class for sure and then on the on the private equity side are you any predictions for the industry in the next 10 to 20 20 years i mean a lot more of the same just continued growth or you know do you see any kind of fundamental transformative changes happening in the in the near term 20 years a long time so i'm not i'm not sure i'd have been effective if i'm predictive at predicting what's going to happen 20 years from now then there's a lot of things i would probably be doing right now look i think that private equity you can read any report you want to read there's there's plenty of capital in the world.

And there are fewer deals, and the ability to create positive outcomes or attractive outcomes on the deals is becoming increasingly hard. So I think almost anybody you ask, and I think that's been one of the things we focused on heavily at Apollo over the last six or seven years, is that the ability to drive value from operations will become more and more important. And those that can do it systematically, programmatically, configure solutions for companies efficiently effective, which I think we're doing at Apollo and we're becoming more effective every day at it.

I think those companies will win. Operating partners are going to have to become technology enabled. And that has been something technology, I think for a long time in the operating partner world has been something that's been done on the side. And I think you're going to see it integrated in the model.

I think we've done that effectively At Apollo, we don't even just have one technology group. We've split our groups into technology, infrastructure. We have data, digital, product, and AI. So we're covering the full gambit with expertise across the board and integrating that effectively into other aspects and other functions.

So whether it's our ESG function, integrating data, whether it's our sourcing function today, I think we, we use AI within our sourcing function. We have a $60 billion spend cube that we manage using AI to read contracts in order to identify leakage that occurs across our value chain. Those are, those are very unique things that I think that we are doing that are exceptional. I think that is going to become much more of the norm.

And in the absence of that, I think firms that aren't doing that will suffer. That's super interesting. It really is. Fascinating to get your perspective again.

I think the reflect on the past 20 years and how much the industry has changed and also the operating, you know, kind of partner structure the next 20 years, who knows where it's going to go for sure. But I think that's interesting that you're already adopting those technologies, you're driving them. While, you know, the size of AUM that you guys have and people, when people look at private equity firms, they're like, that's hundreds of millions and billions of dollars, but the port co's themselves aren't necessarily that large, right?

There's several hundreds of millions, sometimes on the low billion side. So, you know, they do need advice on the latest technology. They don't necessarily have the large tech teams that some, you know, public companies and fortune 100 funds will. So them being able to lean on a center of excellence, you know, especially around a discipline that's evolving so quickly and you know do they spend money on it do they not how can it be used effectively i think is is critical to the to the industry are other groups doing that are you hearing you know the same from from the other cohorts that go to pei or i think the conference the conference this past couple days is heavily focused on ai what i think is key though is you you and i could both choose to focus on technology the differentiation comes when I can develop.

Patterns and clear playbooks for action that are flexible enough so that I can apply them across multiple situations. And I think, I can't speak to say that a firm is effective or less effective, but as an industry, the industry has historically focused on just doing projects, doing projects within an individual portfolio company. When you get to the point that you can execute repeatedly across a series of companies and with fewer people using third parties that can sort of rinse and repeat, that's the point in which you can really drive accelerated value creation.

I think we are starting to do that across with respect to AI. We've done that already with respect to when we do a carve out, I'm not going to say it's flawless, no carve out flawless, But the repeatability across our carve-outs, the repeatability in which we deploy data platforms, the repeatability in which we're now executing, whether it be pricing or whether it be a series of other initiatives, it's accelerating almost exponentially. So I think there are many other firms that are trying to follow and do that.

There's a few that are doing that effectively, but I think it's one of those things that there will be leaders and there'll be followers and there'll probably be four or five or six firms that really lead. And the other will see that example over the course of time and follow. I think we're leading. Pretty sure we're leading.

I like it. That's a good call for action in some competition out there. Before we wrap up, Aaron, I wanted to ask you kind of a broader question as well around just generally leadership and some of your lessons from your experience and maybe some of the blood, sweat, and tears in what's effective and what's not. Love to hear of you.

I think it's one of those things. I think this is probably along with talent, but I think, you know, talent is leadership's a function of who you put into the chair is one of the most important things, not just for private equity. It's just, it's, it's across the board. And there's a phrase that has started to come to my mind often, which is there's a lot of people that love to be leaders, but there's very few people that love leadership.

And that is, I think that is a something, forget as a country in the US and probably globally need to worry about, but it's, I think it's increasingly important. I definitely look for it when I hired my teams, whether my teams are private equity or otherwise. We look for it, starting to look for it more and more when we hire in the portfolio. But the idea of individuals who have a set of firm principles to guide their leadership and their thinking, because what you often get when you have a leader that does enough leadership is you get a manager, you get a facilitator.

And regardless of whether they've been a CEO before, regardless of whether they've been they've been on top of a large organization. When an organization really needs to inflect, truly inflect, there has to be someone there who is willing to remove the friction that's associated with that organization inflecting and provide the energy that's necessary for the organization to do so. And I think more and more, not more and more, I think people are starting to recognize that definitely in private equity and identify people who are leaders who love leadership more than just managers who sit on top of organizations.

And so I think it's something that I have found interesting over the years, and I've probably become more, less compromising over the course of time in finding those individuals. Interesting. So it's not just a mindset, but also a capability to flip, right? Be agile, be a wartime, as well as a peacetime CEO, depending on the environment in which you're having to operate.

Is that? Yeah. And I think it's, it's step into the breach for lack of a better word. The phrase I use, I've used recently for those that love American football is stay in the pocket.

Right. There's, you know, when you, when we think about, and I'm not a lover of the Patriots, but someone like Tom Brady, it's, it's, can you stay in the pocket and deliver the strike? And regardless of the circumstances around you and regardless of what's going to happen, I think those that, it's a common, it's common. I mean, I tend to hire a lot of people from West Point.

I tend to hire a lot of people who've been from academies of leadership. And the reason for is they have a deep understanding of that and what it really means. And I think the more you can build your organization with leaders throughout, not just at the top, the stronger your organization is over the course of time. Yeah, no, I love it.

That's extremely telling. And I think there's, you know, there's a limited number of people that have that broad insight, right? Because you're not just hiring, you're also operating with, you've been making changes, you know, across multiple organizations, right? At any time in any given year and seen it over, over, over a couple of decades.

So that, that view is, you know, I think is, is worth its weight in gold. It's extremely important so yeah i appreciate you sharing that thank you uh it's fantastic to to chat with you erin i really appreciate your time and you know i know for anyone who's in pe themselves maybe a smaller firm or you know is an operating partner or even even a deal partner i think on the finance side will uh hopefully find the conversation interesting and uh you know if you post any images or there's any video from some of your guest lectures i know people would be interested in seeing that, um, out on, uh, on LinkedIn.

So just want to say thank you again for your time on Friday. Um, yeah, it was great to see you. So appreciate it. Appreciate it.

Thank you very much.