Proposing a new approach to discussing economic effects of design quality

As the concept of Six Sigma has been the dominant theme in the recent wave of quality initiatives, a body of related theoretical work slowly starts to evolve. Some contributions discuss the economic implications of better production quality and therewith provide the rationale for companies to strive for Six Sigma defect levels. Opposed to this, the complementary concept of design quality has received little recent attention. Previous contributions in the economics, operations or marketing literatures equate design quality to product differentiation and analyse economic implications of different product categories. However, this discussion is not providing insights into the economic effects of deviating from design optimality in the choice of a product's design. Such analysis would have great relevance for companies as they aim at addressing customer needs in the most precise way possible to avoid failure in the market. In this paper, we therefore discuss the economic effects of design quality using a novel focus on deviations from optimum designs. We find that deviations from both optimal feature composition and optimal production technology likely result in losses similar to those commonly attributed to poor production quality. One important implication of our approach is that higher design quality must not, as commonly assumed, be connected to higher production costs, but might in fact reduce the cost level. With our contribution, we aim at providing a rationale for investments in design quality improvement, a complement to the economic analysis of production quality and an inspiration for future empirical studies.