Many companies have embraced Continuous Improvement as a means of ensuring that a product or process is performing satisfactorily. Yet many also fail to reap its benefits because the quality measurements they still employ are too crude for today’s competitive marketplace.

Take for example the way in which the performance of an engineering part is measured (see exhibit). As long as the product falls within a given specification range, performance is judged to be satisfactory. This range includes parts functioning at the lower edges of their specification limit as well as parts which are bang on target. Given this, in the exhibit, are the "good" parts A and B equally acceptable, or is part B, in fact, more like the rejected part C?

Such questions become important in the context of parts or processes which have to perform in unison. The door and door frame of an automobile, for example, can be made out of many small stampings welded together. If each part, passed as "good," only barely meets its specification, the overall result is likely to be an ill-fitting door. That is because tolerances can—and do—add up. In complicated products the cumulative effect is a loss of quality.

A black and white, "good or bad" approach to measuring quality also reduces the likelihood of any investment to raise standards. If all products and processes that fall within the range of upper and lower specification limits are regarded by management as equally good, it is difficult to justify more spending on improving quality within the range. To improve performance, therefore, managers must rid themselves of this black and white vision, whereby parts or processes are judged as either meeting or missing arbitrary specification limits. They must be aware of the range of quality within these limits, and seek improvements within that range.

Managers who really understand the Continuous Improvement ethic know that the further you deviate from target specifications, the greater is the likely loss of quality to the customer. Genichi Taguchi, the father of Quality Engineering, developed a measurement to quantify that loss. Known as the Loss Function, it estimates that customer loss, be it measured in terms of warranty costs, repair costs, or ultimate loss of economic utility, increases quadratically the further a product or process deviates from the target specification; in other words, products are not merely good or bad. The key aim of Continuous Improvement should therefore be to hit design targets more precisely, thereby reducing the part-to-part or day-to-day performance variability that can have a negative impact on product or process performance and, ultimately, customer satisfaction. Once that is accepted, engineers or managers can make a better case for investment to improve quality, whether or not performance currently falls within "spec."

Continuous Improvement is no longer a purely technical issue—the philosophy is permeating the entire business system, including "soft" areas like customer service. Yet managers who persist in measuring performance in black and white, refusing to evaluate anything that falls between, are unlikely to meet today’s quality requirements. When customers start complaining, those managers will be looking elsewhere for the source of the problem—perhaps to their suppliers. The real problem, however, may be their own black and white mindset.