IT Alignment helps increase value and competitive advantage from IT investments / digital innovations. Value creation is the key to profitability and competitiveness. Yet, the achievement of value is a necessary but not sufficient condition for competitive advantage. Another factor is the number of available products/services from other firms that provide the same kind and extent of value to customers. Both factors impact prices, demands, and revenues.
Competitive advantage depends on the higher value that customers perceive from a firm’s product/service relative to the competitors’ products/services. In short, competitive advantage is a state of superior enterprise performance in which a firm creates more customer value than competitors.
Valued products/services come from differentiation strategies. The corresponding customer value categories are product leadership and customer intimacy. If there are numerous comparable products from competitors on the market, then there is a high competition on prices. In this situation, cost pressures on enterprises are high and customers receive economic advantages that stem from low prices. Operational excellence is required to compete and survive on the market. Successful firms must pursue a cost leadership strategy and produce at lowest costs; business process flows must be highly efficient.