18 CHAPTER ◆ 2 Key Concepts and Definitions of Terms
The Japanese word kaizen , meaning “ to change for the better ” or “ improvement, ” is often
used in quality-related research to refer to continuous improvement.2.6. Customer, Client, and Investor
Since only the customer can define quality, both top management and product teams
should fully understand who their customers are and what their needs are. (The defini-
tions of the terms “ client ” and “ customer ” are not identical though we will use the terms
interchangeably. A client is a person that uses professional services, whereas a customer
is one who purchases goods or services. Quality requires a customer focus, while profes-
sional services require client focus.) With respect to trading/investment system start-ups,
we distinguish between two investor groups we consider to be clients, or customers:1. Seed capital providers in the management company. For clarity, we will identify
seed capital providers as such, or as seed investors. The customer in this sense may
be a proprietary trading house for whom the product team works, a traditional money
management or mutual fund firm, a hedge fund, a group of venture capitalists, or
an individual or group of individuals. Seed investors provide capital for development
and operation of a trading/investment system. They also earn the manage ment fees.
2. Investment capital providers , to whom the product team owes fiduciary responsi-
bility. Anyone who provides capital for the investable sum of a trading/investment
system will fall under the term investment capital provider, or simply investor or
client. An investor may also be the proprietary trading house for whom you work,
a traditional money management or mutual fund firm, a hedge fund, a group of
venture capitalists, or an individual or group of individuals.As with all quality, in our methodology customer focus is the top priority. In this
sense, the term customer applies to both seed capital providers and investment capital
providers. While this book covers processes for design and development, understand that
the product team ’ s attempt to satisfy demands of both of these groups drives all proc-
esses. For the purposes of our discussion of quality and trading/investing, we will assume
that customers, that is, investors of all kinds, demand better returns and lower risk relative
to an associated benchmark and at lower cost.2.7. Corrective Action
According to ISO, corrective action is any “ action taken to eliminate a detected non-
conformity. ” Accordingly, corrective action is a fix and not a patch or containment of
nonconformity. Corrective action may be taken in response to nonconformity of a trading/
investment system, as well as to the process of trading/investment system development.2.8. Delphi Techniques
The well-known Delphi method is a forecasting mechanism based on a systematic, itera-
tive gathering of independent, open-ended inputs from a panel of selected experts. It solves
problems by establishing consensus among panel members through repeated problem
definition, discussion, and feedback. Usually, in later iterations, panel members rate the