276 CHAPTER ◆ 3 0 Kaizen: Continuous Improvement
Gate meetings allow top management to monitor progress of product teams and to assess the
value of each trading system and whether or not it is worthy of additional resources for
further development.
● Formalize a process of developing, building, and packaging working trading/
investment systems for sale to larger institutions.
Well-documented trading strategies built with well-documented technology are far more
easily salable than those without.
● Enable seed capital providers to better allocate scarce resources and prioritize
individual trading/investment systems within a portfolio of competing systems.
Given a portfolio of systems, top management can optimize resources to the most prom-
ising projects.
● Lengthen the maturity stage of the life cycle of working trading systems through
continuous improvement.
Through continuous improvement, a firm can defend their strategies against competitors
launching their own systems.
● Satisfy the demand by investors and regulators for greater transparency through
greater and standardized documentation.
By standardizing the process of research and documentation, a firm will be better able to
meet the demands of regulators as well as investors for increased transparency.
● Create a taxonomy of risk for trading/investment system development and man-
agement and employ best practices to reduce risks.
At each step along the development process there is both risk of failure and opportunity
for competitive advantage. By understanding risks, firms can benchmark processes and
define best practices to mitigate risks. Through a Capability Maturity Model, as described
in Chapter 2, external observers can evaluate disparate firms on their abilities to deliver
competitive advantage.
● Provide a mechanism for effective self-evaluation, the preferred form of over-
sight in the financial industry.
Lastly, development of industry standard best practices is far better than external over-
sight and regulation by the government. In this text, we have provided many best prac-
tices that will, at a minimum, begin to define areas of concern that should be addressed
by firms that engage in the development and operation of trading/investment systems.
We will end as we began. In the financial markets, the competition gets tougher every
day. The largest problem facing trading and money management firms in the twenty-
first century is not the lack of mathematical or technological understanding but rather an
inability to manage the entrepreneurial processes of systematic innovation, development,
and continuous improvement. By evaluating our methodology and applying those principles
that are relevant to your particular business model, you can strengthen your firm ’ s practices.