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An approach is suggested for the cost-effective systematic design of product on-board diagnostics that allow simple and complex appliances to diagnose or predict failures within themselves. This methodology differs from other current less formal approaches in that it encourages a wholly integrated design philosophy. Trends indicate that on-board diagnostic capabilities will become much more important in both the eyes of the consumer and the manufacturer in years to come. As such, the lack of a formal approach could represent a significant design bottleneck. The approach offered represents a meaningful first step in avoiding such a bottleneck. Furthermore, the technique can be used for evaluation and retrofit of diagnostics on existing products. Relevant background regarding machine self-diagnostics is presented, and future research needs are identified.