Most of the world’s data are obtained as byproducts of operations. These observational data track what happens over time and have a structure that requires a different approach to analysis than that used for experimental data. An understanding of this approach will reveal how Shewhart’s generic, three-sigma limits are sufficient to define economic operation for all types of observational data.

Management requires prediction, yet all data are historical. To use historical data to make predictions, we will have to use some sort of extrapolation. We might extrapolate from the product we have measured to a product not measured, or we might even extrapolate from the product measured to a product not yet made. Either way, the problem of prediction requires that we know when these extrapolations are reasonable and when they are not.

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