Personal Financial Management | The importance of starting early

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If I were to start my career all over again; the one thing I would do differently is attention towards the financial planning — savings & investments — at the start of my career.

The joy of getting your first job & your first pay cheque is great and time flies before you realize that you haven’t saved (& wisely invested) enough. There is absolutely nothing wrong with going to movies with friends, eating out, partying, buying that snazzy shoes & jeans, fulfilling all your needs & wants. The problem is in not paying attention to regularly putting aside some part of your salary towards savings & investments IN THE EARLY PART OF YOUR CAREER.
Not much but just 10% of your salary would be enough to start off your long term savings & investment plan.

As an illustration, here are some examples of the power of saving & investing small amounts over long periods of time:

  • 1000 rupees invested monthly (with 10% increase in investment every year), earning a 10% rate of return, over 35 years will give you ~1 crore.
  • 3000 rupees per month will give you 3 crore & 5000 per month will give you 5 crore over 35 years

To illustrate, the power of starting early:

  • 3000 rupees will give you 3 crore in 35 years, 1.7 crore in 30 years (if you start 5 years later) and just 88 Lakhs if you start saving 10 years later (in 25 years) and just with 10% return

The first step in personal financial planning is to be aware for the need for it. Thankfully, today in the internet age, there is no dearth of information on this subject. Here are some blog posts, that I stumbled upon, which explain several aspects of financial planning.

http://www.jagoinvestor.com/2009/06/can-you-live-with-90-of-your-salary.html

http://www.jagoinvestor.com/2009/02/early-investor-smart-investor.html

http://www.jagoinvestor.com/2011/03/retirement-planning-india-future.html

http://www.jagoinvestor.com/2009/07/6-steps-of-doing-retirement-planning-by.html

So, if you are a young professional, start saving & investing wisely — right at the start of your career. Open a demat account and get some SIP’s going.

The reality is that wealth is generated by people who invest smartly and with discipline, not who just earn lots of money.

Bharti Airtel & the potential 1 rupee scam & fraud that could run into millions

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I have an airtel connection and there has been several instances of ‘unwanted & unasked for’ services that have been activated on my mobile phone and 1 rupee of 2 rupees deducted without notice. This gives rise to several questions on the ethics of airtel & the potential fraud /scam that might be.

Here is an example of an SMS i received which showed an unwanted/unasked for service being activated on my mobile and 1 rupee being deducted.  Some time later in the evening, I again get an SMS, this time for 2 rupees deducted this time around. I then call airtel where I am charged 50 paise to speak to the agent to talk about this issue.

When I talk to the agent, she tried brushing this under the carpet and said that i can cancel this if I want. She had no answer to why & how this service was started in the first place. I could clearly make out that the agent would have been getting several calls like that as she did not seem surprised at all and neither did offer any insight or intention to look into why such service was started without subscribers permission. She did not even offer regrets that this has been done and forget about offering refund and credit of the amount back.

Now below could be a very realistic situation:

This kind of a micro 1 rupee scams being played on millions of airtel subscribers and potential fraud being committed by cheating customers.

The reason I suspect this is that:

  • Many people may just ignore this considering that this is just 1 rupee thing.
  • Many people may stop this service and forget about this and not escalate this to airtel thinking why waste time on 1 rupee
  • Many people not even coming to realize that such 1 rupee amounts are being deducted from their accounts

Anyone has idea of where this could be escalated and brought to notice for investigation.

It is really painful that a company run by Mr Sunil Mittal, who espouses to be the torch bearer of corporate ethics operates in this manner of cheating the customer — however the small the amount maybe. to notice. Anyone else facing such issues?

This is a breach of trust and trust once lost in a brand, by such behavior, is lost forever.

EDIT: A quick Google Search on this subject showed that this is indeed an issue voiced by many of the customers on various forums on the internet

Can organizations be designed like the rain forest? What can we learn from Rain forests?

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These days, GREEN is the ‘in-thing’. Just like innovation; GO-GREEN, Eco-Friendly, etc are words that one would find in most organizational mission statements.  The irony is that just like innovation, organizations seems to be clueless on what this whole ‘GO-GREEN, Eco-Friendly’ thing really means — beyond the rhetoric.

I would say that the first step towards that could be to learn from the natural environment around us. These natural surroundings are like living universities and can teach lessons that one can’t study in all the IVY league business schools combined. We just have to observe these natural surroundings and be ready to absorb, learn and apply those principles in business.

Seemingly remote natural systems like the rainforests can be a great place for organizations to learn from.

So, what can organizations learn from rainforests?

Some 15 years ago,  Tachi Kiuchi (Member of the Board of Mitsubishi Electric Corporation), gave a keynote address to the World Future Society on July 19, 1997 around this topic that I regard as the best pieces of literature around learning from Rain Forests and what organizations can learn from rain forests.

Read it here:

http://www.isss.org/primer/asem30tk.html

Key Points that  Tachi Kiuchi makes are:

  • See & understand how a rainforest operates. How can organizations operate like the rainforests?

A rainforest is an example of a place that excels by learning to adapt to what it doesn’t have. A rainforest has almost no resources. The soil is thin. There are few nutrients. It has no productive assets. Yet rainforests are incredibly productive. They are home to millions of types of plants and animals, and more than two-thirds of all biodiversity in the world. Those plants and animals are so perfectly mixed that the system is more efficient, and more creative, than any business in the world.

  • It consumes almost nothing. Wastes are food. Design is capital.

Today’s fast-changing business environment requires that we be alert, and responsive. Agile, and creative. To do so, we must structure our company so we are a learning organization. Not top-down, but bottom-up. Not centralized, but decentralized. Not limited by rules, but motivated by objectives. Not structured like a machine– which cannot learn– but like a living system, which can.

  • Rainforests are a model of the perfect learning organization. 

 How can we begin? By operating less like a machine, and more like a living system. An Industrial Ecosystem.

  • The most important Natural capital is its design. Its relationships.

 In Japan, we have two terms to describe this: omote and uraOmote is the surface or front of an object, ura is its back or invisible side. Omote and ura . External reality and underlying reality.

When I visited the rainforest, I thought: As business people, we have been looking at the rainforest all wrong. What is valuable about the rainforest is not omote — the trees, which we can remove. What is valuable is ura — the design, the relationships, from which comes the real value of the forest. When we take trees from the forest, we ruin its design. But when we take lessons from the forest, we further its purpose. We can develop the human ecosystem into as intricate and creative a system as we find in the rainforest. We can do more with less. Grow without shrinking.

  • Differentiate. 

Be yourself, be unique. In the rainforest, conformity leads to extinction. If two organisms have the same niche, only one survives. The other either adapts, or dies. In today’s economy, the same happens. If two businesses have the same niche — make exactly the same product — only one survives. The other adapts, or dies.

So what are most companies today doing? They are trying to be the one that survives. Cutting costs. Downsizing radically. Desperately seeking the lowest cost. We think it is much smarter to differentiate. Create unique products, different from any others. Fill unique niches. Don’t kill our competitors, or be killed by them. Sidestep them instead.

Be yourself, Be. Only then — after we differentiate — is it time to reduce costs, and grow more efficient. We have learned this the hard way. We sell millions of televisions, stereos, and appliances. We cannot compete by being the lowest-cost operator. Instead, we must offer products that are different, distinctive. We must choose and fill our unique niche.

  • Be a Good Fit. 

We used to say, “Only the fittest survives”. There is only one winner. But in the rainforest, there are many winners. The same can be true in our economy. In the old, uniform, monoculture economy, only one form wins, only the most fit survives. At least until a new invader wipes him out.

In this new, diverse, rainforest economy, it is not a question of who is most fit. It is a question of where we best fit. If we fit — if we solve a social problem, fulfill a social need — we will survive and excel. If we only create problems, we will not.

That it is an eco-system and not silos. In organizations we see one department not taking t another.

Knowledge Repositories. “No one goes there any more; it’s too crowded”

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Yogi Berra: “No one goes there any more; it’s too crowded”

The success of any knowledge repository  within an organization depends (largely) on the information contributed to the system by employees, project teams, communities, departments. However, the truth is that knowledge repositories in most organizations end up rarely being used.

Contribution to knowledge repositories remains minimal — although employees are required to contribute lessons learned to the knowledge repositories and also consult the repository regularly. In reality, with passage of time, as less people use the repository, the information becomes stale and irrelevant — presenting another reason for employees not to use the system. And, not surprisingly, soon the word spreads that  the repository is outdated and does not include the information they are looking for. That reinforces the  famous quite from Yogi Berra: “No one goes there any more; it’s too crowded”

Employees could have gripes that the knowledge repository  is not user friendly, lacks certain features & capabilities. Those are often the right reasons for people not using the knowledge repository but not the real reasons. The real reason is that the knowledge repository is NOT part of the day to day work process of an average employee in the company. it is at the periphery, something that needs to be transacted with ‘after work has been done‘ or during appraisal cycles.

Knowledge Repositories need to be treated like living ecosystems, living things, like a garden with continuous need for tending, monitoring, careful purging and at times a full over haul. Then only will the garden bloom with flowers that provide value to the whole ecosystem.

Till then the adage  “No one goes there any more; it’s too crowded” will continue to hold true for knowledge repositories

5 takeaways from the Social India Conference and Suggestions for the next Social India Conference

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It’s been a week since the first Social India conference (held on the 12th – 13th November  2011 @ Bangalore ) concluded and I am pretty late in writing my thoughts on this. So, I will not bother with what happened at the conference. For that, I suggest you read the awesome summaries penned down by fellow participants & bloggers here:

http://blog.fatema.in/2011/11/my-take-on-the-social-india-conference-2011/
http://blog.gmrwebteam.com/social-india-conference-bangalore-india-day-2/
http://lighthouseinsights.in/2011/11/sanjay-mehta.html
http://lighthouseinsights.in/2011/11/shashank-nigam-speaks-at-socialindia.html
http://lighthouseinsights.in/2011/11/stefan-kolle-don%E2%80%99t-try-this-at-home-at-socialindia.html

Overall, it was a very nice experience for me and I look forward to the next one. I really met some nice people in person, some great fellows online and hope to continue interacting with them. What I am sharing here is 5 key takeaways from the Social India conference and few suggestions for the next one

  1. Every organization (or for that matter, even individuals), regardless of size, nature, scope, location etc can make use of Social Media. This is aptly demonstrated by the fact that AkshayPatra, a NGO which enables hunger free education to 1.3 million children in India, was the organization behind the event. They did a superb job of lining up great speakers, logistics, venue and AWESOME food. The fact today is that Social Media can’t be ignored and just as internet/e-commerce changed things for good a decade & half ago, Social Media is doing it now.
  2. Organizations need to go beyond just using facebook/twitter to effectively use Social Media. True listening, humanized approach, conversations & engagement with stakeholders is what makes an organization social — Not many organizations realize that there is a difference between using Social Media & being a Socially enabled organization.
  3. We are still in early days of Social Media and no one has clue to where this will lead to. However the best way is to be part of the journey rather than be a bystander and watch the world go by. In most organizations (which later became showcase case studies of Social) the journey started almost by accident and not necessarily by design. Someone then picked that experiment and nurtured it, make it legitimate and brought it to business center stage. We are still in the education & awareness phase of our Social Media journey and this I say because almost all speakers had a 101/why Social Media is important component part of their talks and almost all had case studies on facebook campaigns etc. None actually pushed the boundary and had really thought provoking stuff to talk about.
  4. Social Media RoI is still a hazy & murky area with the jury still out on how best to measure it or what to do next with the 2 million fans you have on your facebook page. There are several theories out there on what to measure, how to measure, what to report, what to watch for etc but all these are still fuzzy with little acceptance from the bean counters existing on organizations
  5. There is a HUGE disconnect between Social Media initiatives of an organization for their external needs & how they use it internally and integrate it with rest of the organization. This is also evident by the fact that almost none of the speakers touched upon the finer aspects of usage of Social media within the organization and examples of these. Even integration of Social Media initiatives with other internal business processes, systems etc is something that organizations are not thinking of as yet. I am sure in years to come that will be the #1 driving force.

Now coming to suggestions for next year conference:

  1. We had a good mix of local, national & international speakers. Please do continue that part. Maybe include the participants in suggesting the topics for sessions and the speakers can pick those topics.
  2. Can we have a mix of user generated sessions — a.l.a unconference sessions. Say breakout sessions for 1.5 hours after lunch each day where participants themselves can come up with sessions & be the speakers etc.
  3. Do have more speakers, handling Social Media within corporates, who can share their experience of what it takes to implement social Media initiatives, can speak of their relationships with Digital media agencies, what they expect from agencies, where do the agencies fall short, How they handle RoI, what questions get asked to them internally. Basically, stories from people implementing Social Media within organizations. (We did have Shauna Cassey from nordstorm talk about SM initiatives internally but would be good to get Indian Perspective also)
  4. Have speakers push the boundary by talking not just 101 but 301 topics also like integration, sophisticated RoI models which go beyond just the case studies by Social Media Agencies of organizations having facebook & twitter campaigns

So, what were your takeways from the Social India conference & what will be your suggestions to make the experience even better next time around?

Online shopping is changing from a transactional model of e-commerce to Social Experience

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Online retail & shopping is changing from a transactional model of e-commerce with buying decisions of online shoppers getting influenced by social communications and the fundamental shifts taking place in the online social environment.  Today’s online shopper is not just a buyer of goods & services. They are social shoppers who also play the role of critics, brand ambassadors, product experts, & are key influencers in buying decisions within their social circles and even beyond

While the mouth-to-mouth sharing of experiences is nothing new and has been happening since time immemorial, the fundamental change is in the the magnitude of the inter-connectedness that social platforms bring to the table and the reach of these platforms. The voice that an individual has as part of the larger eco-system. (combine this with above reach point and just realize the impact it has?). The level of openness, transparency & discoverability that the changing online social platforms are bringing. Consumers are no longer shy of expressing themselves and acknowledging that they made a good or a bad decision in buying a particular good/service. Fundamentally, Social Platforms are transforming the way people behave online

A recent survey of internet users in the UK revealed that

  • 70% have purchased a product/service online
  • 53% have reviewed a product/service online
  • 30% have sent a product recommendation to a friend online

Buyers are getting influenced by the social product reviews and not just marketing pitches by the brands. In-fact, customer’s reviews are fast catching up with search engines towards influencing online purchase decisions.  Empowered customers are increasingly motivating other shoppers and triggering purchase considerations. While lowest price/VFM pricing is still a large influencer of online purchase decisions but it is not just the only & sole driving factor. Infact, research suggests that customers are willing to pay premium for a 5* rated product vs a 3* rated product.  The purchase trigger/consideration/decision making process is moving more & more online – driven by social feeds. (previously, the consideration process was offline, with just the purchase transaction being done online)

So, what does this mean to the online retailers?
Online retailers need to understand these social changes taking place online and get plugged into the social, collaborative, emergent, inter-connected online market place for building differentiated offerings, relationships & touch points with the customers.

Is your retail/online strategy ready to leverage the social phenomenon?

Why organizations need 2 different Social Media Policies

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Dion made an excellent blog post on the subject of connecting employees to social media where he elaborates the need for a comprehensive social media policy. I agree with his thoughts on this subject and firmly believe that organizations, who want to start their journey towards social enablement need to critically think on the SM policy that they need to create. Starting the SM journey without a sound SM policy is like driving on a road with no defined destination.

While most SM efforts are targeted towards the enterprise engaging in & leveraging external social channels, I firmly believe that organizations need to be socially enabled internally and then only they can be truly socially engaged externally. Going forward, it just can’t be let to a select group of people (in marketing, sales, customer service) to be socially enabled externally without they tapping into the internal social enabled enterprise.

Towards this, I think that the dynamics, context & implementation nuances within the enterprise are different from the external landscape and hence there is a need for a differentiated internal & external SM policy. This doesn’t mean that they differ at the concept level but just the implementations, rules of engagement could differ and clearly articulating it though separate SM policies would reduce confusion & give greater clarity.

For example, the external policy could have rules of engagement in external channels, do’s & don’ts, workflows, roles & authorizations, NDA’s etc aspects covered; while the internal policy could focus on tying internal social initiatives with work, collaboration, KRA’s, objectives, culture, rewards, acceptable norms of engagement, IP etc.

What do you think? do you also think there is a need for separate internal/external SM policies or just one will do? What’s been your experience?