Tags: El-Erian | companies | disruption | technology

El-Erian: Companies That Don't Adapt to Disruption 'Will Find Their Days Numbered'

By    |   Thursday, 09 April 2015 07:00 AM

"Disruption" is the big buzzword in the economy these days. Technology-related companies such as Uber and Airbnb are disrupting the way we do business.

So how can companies cope with this disruption? Mohamed El-Erian, chief economic adviser for Allianz, offers four guidelines.
  • "First, companies should modernize core competencies by benchmarking beyond the narrow confines of their industry," he writes in an article for Project Syndicate.
  • "Second, they should increase their focus on customers, including by soliciting and responding to feedback in an engaging way.
  • "Third, managers should recognize the value of the data collected in their companies' everyday operations, and ensure that it is managed intelligently and securely.
  • "Finally, the micro-level forces that have the potential to drive segment-wide transformations should be internalized at every level of the company."
Bottom line: "Supply and demand. More than ever, people want – indeed, feel empowered to expect – cheaper, smarter, safer, and more efficient tools to live a more self-directed life. Companies that fail to deliver will find that their days are numbered.

The ultimate measure of a company's success, of course, comes in the stock market. And while the S&P 500 index stands less than 2 percent from its record high, Jim Paulsen, chief investment strategist for Wells Capital Management, sees risk for equities in the near term.

"Recently, we have become concerned about three major challenges facing the U.S. stock market — investor sentiment has become a bit too calm and confident, valuations are a bit too extended and interest rates finally seem likely to soon be reset higher," he writes in a commentary provided to Newsmax Finance.

"We continue to expect the stock market to eventually navigate these challenges and most likely the bull market will persist for several more years. However, until these issues are addressed, the stock market seems likely to struggle, remain more volatile, and perhaps suffer a correction."

A correction is generally defined as a loss of at least 10 percent.

As for investor sentiment, a gauge of it called R-squared provides room for concern, Paulsen says. When it comes to valuations, the S&P 500's trailing price-earnings ratio stood at 20.25 Friday, up from 17.69 a year ago, according to Birinyi Associates.

And on the interest-rate front, many economists expect the Federal Reserve to begin raising rates in September.

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"Disruption" is the big buzzword in the economy these days. Technology-related companies such as Uber and Airbnb are disrupting the way we do business.
El-Erian, companies, disruption, technology
Thursday, 09 April 2015 07:00 AM
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