Think of this document as the blueprints of a house. Without that blueprint, the house will probably also have a foundation, walls and a roof, but the internal orientation of rooms, power and water connections and position of doors and windows won’t be optimal.
This blueprint affects how the structure of the house will be, before it’s built. In the same way, the design document affects the code of the program. Note that I’m not only talking about how the interface will look to the user (this is described in user-interface design documents, which are a part of the design document, but not all of it) but also how it will behave, feel, …

So what are the benefits?

The program gets built

Ideas get forgotten, but because the document is on paper (or in digital format), it also works as a reference. There can be a checklist made from it, so that all points are actually addressed. It also makes it easier to define what it in scope and what isn’t.

Benefits for the programmers

When writing a program, the work is never “done”. There is always something that can be added or changed. This fact makes it harder to predict and keep a deadline. But because every aspect of the program is defined in the design document, it is clear when the construction is finished (when all points in the document are addressed).

Benefits for marketing

When marketing a computer product, there are 2 important points: features and release date. There points are notoriously hard to keep in the world of IT. Because all features are described in the design document, there is no misunderstanding over what will be in the product once it is finished and which features won’t have made it. Also, since all the features are known, there can be a better estimate of when the actual release date will be and the marketing campaign can be focussed better on that date. So because there 2 points are under controle, the marketers can make it clear to the buyers how the product will benefit their users.

Benefits for help documenters and technical support

When a product is well designed (which is what the design document is ultimately for) there are fewer complex and/or confusing interactions. This means that the help documenters need fewer long explanations and spend their time writing better and smaller manuals. Also tech support will benefit, since they’ll have less calls for support.

Benefits for managers

A well known project is a project that is easier to manage and predict, both when it comes to people (the programmers, designers, …) and the financial aspect.

Benefits for the company

When a product is easy and intuitive to use, and it delivers on time with all features promised (the release date and features the marketing department stated), customers will be happy. Happy customers results in customer loyalty, a company’s ultimate goal (besides making money )

[From: The Inmates Are Running The Asylum (book)]