[6] Taguchi knew statistical theory mainly from the followers of Ronald A. Fisher, who also avoided loss functions.
He also realised, as had Walter A. Shewhart and others before him, that excessive variation lay at the root of poor manufactured quality and that reacting to individual items inside and outside specification was counterproductive.
Though the short-term costs may simply be those of non-conformance, any item manufactured away from nominal would result in some loss to the customer or the wider community through early wear-out; difficulties in interfacing with other parts, themselves probably wide of nominal; or the need to build in safety margins.
Taguchi argued that such losses would inevitably find their way back to the originating corporation (in an effect similar to the tragedy of the commons), and that by working to minimise them, manufacturers would enhance brand reputation, win markets and generate profits.
Donald J. Wheeler characterised the region within specification limits as where we deny that losses exist.
All these losses are, as W. Edwards Deming would describe them, unknown and unknowable, but Taguchi wanted to find a useful way of representing them statistically.
For example, Taguchi's recommendation that industrial experiments maximise some signal-to-noise ratio (representing the magnitude of the mean of a process compared to its variation) has been criticized.
In many circumstances, this allows the parameters to be chosen so as to minimize the effects on performance arising from variation in manufacture, environment and cumulative damage.
Taguchi argues that such interactions have the greatest importance in achieving a design that is robust to noise factor variation.
The Taguchi approach provides more complete interaction information than typical fractional factorial designs, its adherents claim.
His emphasis on loss to society, techniques for investigating variation in experiments, and his overall strategy of system, parameter and tolerance design have been influential in improving manufactured quality worldwide.