Inertia 5 technology has traditionally been the cornerstone of the American com- petitive game, countries with an advantage in process technology have gained a dual advantage. First, it is difficult to copy a distinction in process technology because its critical elements are knowledge workers. Second, competency in a pro- cess technology makes it simpler to transfer knowledge from one context to another, easing the operationalization of new knowledge. The results are dramatic: much faster time-to-market performance, a lower break-even point, better product variety, and faster response to change. In the late 1970s, a well-known equipment company in America real- ized it had a 40% cost disadvantage in comparison with its direct Japanese competitor. The company, ironically, was the technological leader in the lift truck industry. Its cost structure was 40% raw material, 15% direct labor, and 45% overhead. Overhead (transformation cost) was simply cal- culated as 300% of direct labor. The company decided to reduce the cost by 20%. It was assumed that a 5% reduction in direct labor would automatically reduce overhead by another 15%, resulting in a 20% cost reduction. After a whole year of struggle, direct labor was reduced to 10% without any reduction in the