Potentialsvärt

Potentialsvärt is a term used in decision analysis and strategic planning to denote the latent value that a project, asset, or option could generate under certain future conditions. It represents the upside that is not yet realized and may not be fully reflected in current prices or base-case projections. The term is a Swedish neologism and is not yet standardized across disciplines.

Definition and scope: Potentialsvärt focuses on conditional value of outcomes that depend on future drivers such as market development, technological progress, regulatory change, or strategic actions. It complements traditional measures like present value and expected value by highlighting value-creating possibilities that might emerge under favorable scenarios.

Calculation and estimation: In practice, potentialsvärt is estimated through scenario analysis, real options reasoning, or probabilistic models. Practitioners define driver variables, assign probabilities to scenarios, and estimate payoffs for each outcome. The potentialsvärt is the probability-weighted average of these future payoffs, typically over a defined horizon and with discounting when appropriate.

Applications and examples: In product development, potentialsvärt can justify continuing work despite negative current returns if the upside under successful adoption is large. In real estate or energy projects, it helps compare options with high upside but high uncertainty. In policy evaluation, it highlights contingent benefits that depend on future conditions.

Limitations and critique: The concept is subjective and model-dependent; results rely on chosen scenarios and probability assessments. Without transparent documentation and sensitivity analysis, potentialsvärt can be overestimated. It should be used alongside other metrics rather than as a sole decision criterion.