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2.34. Value Stream and Value-Stream Mapping
For our purposes, a value stream consists of the activities required to design and develop
a working trading/investment system from concept to launch to ongoing management.
Identifying the entire value stream for each financial product is a step which trading and
money management firms rarely attempt but which almost always exposes enormous
amounts of waste.^17
Our methodology is essentially a trading/investment system value stream map in that
it identifies the activities along the value stream and their flow.2.35. Variation
Performance of a system can be measured. Measurements will reveal two types of variation:● Common cause variation is fluctuation caused by unknown factors resulting in a
stationary, but random, distribution of process output around a mean. Furthermore,
common cause variation is a measure of the potential of a process or system, that
is, how well the system will perform after all special causes of variation have been
removed. Common cause variation is also called random, nonassignable, or noncon-
trollable variation or noise.
● Special, or assignable cause, variation is that fluctuation caused by known fac-
tors, or root causes, and resulting in nonrandom outputs. Special cause variations
shift process output and are caused by specific process inputs. Once accounted for,
corrective action can potentially remove special cause variations.2.36. Vendor
A vendor is a company that sells processes or technology for trading/investment sys-
tem implementation. By vendor, we mean to include companies that sell software, such
as order management systems or FIX engines; hardware, such as servers and leased
lines; data and databases; and analytics, such as risk management processes or market
indicators.2.37. Summary
The field of quality has a vocabulary unto itself. Because over the course of this book
we will intersperse the languages of financial markets and quality (and by use of the
term quality we mean to include Quality, Six Sigma, and Lean), clarity is important.
Additionally, we have defined several terms from finance that are not necessarily clear
with respect to trading/investment system development.2.37. SUMMARY