I first noticed large differences in cost among companies in the same industry years ago when looking at factory overhead costs in manufacturing industries such as auto parts and in industrial components such as forgings and castings. The ratio of indirect labor (frontline supervisors, expeditors, quality inspectors, materials handlers, and rework specialists, for instance) to direct labor varied by a factor of two or three. The companies with the lowest ratios were different in both what they valued and how they operated; for example, they showed greater commitment to upgrading skill levels, resorted less to outsourcing as a solution to cost problems and instead invested in technology, and questioned and redesigned their workflows more frequently. (See “The Fallacy of the Overhead Quick Fix,” HBR, July–August 1991.)