22 CHAPTER ◆ 2 Key Concepts and Definitions of Terms
treatment of a product. ”^13 According to Deming, “ a system is a network of interdependent
components that work together to try to accomplish the aim of the system. A system must
have an aim. A system must be managed. ”^14
Furthermore, processes or systems can be either singular or continuously recurring.
From an engineering perspective, a process consists of actions that take time, expertise,
and other resources, to create changes in the properties of one or more objects under its
influence. Our methodology looks at two continuously recurring processes or systems:- The process of interdependent human components cooperating to design and develop
trading/investment strategies and enabling technologies, called product realization
in ISO 9000. (Essentially, this system creates the second process or system.) - A working trading/investment system generating measurable performance metrics.
While the two terms are used interchangeably in literature relating to quality, we will for
clarity attempt to refer to the first definition above with the term “ process ” and the second
with the term “ system. ”
All work is accomplished through processes, and trading/investment system devel-
opment is no different. The methodology presented in this book is essentially a set of
interrelated processes that transform inputs into outputs, which in the end transform raw
financial and market data into a working trading/investment system.2.18. Process Approach to Management
A process approach requires a trading or money management firm to view its operations
as a series of interrelated and interacting processes. Such an organization must identify and
understand its processes for trading/investment system design and development and con-
sciously manage them. Furthermore, such an organization should measure, monitor, and ana-
lyze trading/investment system performance to ensure conformity and implement preventive
and corrective actions necessary for achievement of results and continuous improvement.2.19. Product
A product is the outcome of a product realization process. As we use the term, a product is
a working trading/investment system that conforms to backtesting results. Several resources
are required to design and develop a product—people, machines, facilities, and money.2.20. Product Realization
Product realization is the process that brings a product into reality. Product realization
processes are those that conceive of the product in response to customer requirements;
define, implement, and operate the means of production; and at the same time verify or
validate the design and the production processes. As we use the term, product realization
consists of the design and development, testing, implementation, and ongoing manage-
ment of a new trading/investment system.