In simple yet profound terms, variation represents the difference between an ideal and an actual situation.
An ideal represents a standard of perfection—the highest standard of excellence—that is uniquely defined by stakeholders, including direct customers, internal customers, suppliers, society and shareholders. Excellence is synonymous with quality, and excellent quality results from doing the right things, in the right way.
The fact that we can strive for an ideal but never achieve it means that stakeholders always experience some variation from the perfect situations they envision. This, however, also makes improvement and progress possible. Reducing the variation stakeholders experience is the key to quality and continuous improvement.
According to the law of variation as defined in the Statistical Quality Control Handbook:
If outcomes from systems can be predicted, then it follows that they can be anticipated and managed.
In 1924, Dr. Walter Shewhart of Bell Telephone Laboratories developed the new paradigm for managing variation. As part of this paradigm, he identified two causes of variation:
Shewhart further distinguished two types of mistakes that are possible in managing variation: treating a common cause as special and treating a special cause as common. Later, W. Edwards Deming estimated that a lack of an understanding of variation resulted in situations where 95% of management actions result in no improvement. Referred to as tampering, action taken to compensate for variation within the control limits of a stable system increases, rather than decreases, variation.