Value leakage is broader than project failure
A failed implementation, an overrun, or an investment that never produces its expected return is an obvious form of value leakage. It is not the whole category.
A move can meet scope, schedule, budget, and its stated objective while still leaving substantial value uncaptured. A better configuration may have been feasible. A complement may have been missing. The sequence may have been inferior. A shared capability may never have been built. The move may have closed options or consumed constraints that mattered elsewhere.
Talbot West therefore uses value leakage for the gap between realized enterprise value and a better value state that was reasonably attainable from the enterprise’s actual situation.
Commission-side leakage
Commission-side leakage is value impaired through a path the enterprise actually takes.
It can enter when the enterprise frames the wrong object, selects an inferior path, configures the right elements poorly, sequences commitments badly, loses economic logic during implementation, fails to achieve adoption, misses material evidence, or continues after the economics have changed.
The path does not need to fail outright. It only needs to realize materially less value than a feasible better treatment could have produced.
Omission-side leakage
Omission-side leakage is value absent because a superior feasible path never becomes a realized path.
The possibility may never be discovered. It may be noticed but never constructed into a viable configuration. It may never be represented adequately, evaluated seriously, enabled, sequenced, selected, or made reachable.
This form is easy to miss because enterprises can observe the investments they make and the outcomes those investments produce. A superior path that never entered the operative possibility set can leave no comparable project record behind.
Excellent execution does not solve this problem. An enterprise can execute an inferior configuration perfectly.
The counterfactual must be reasonably attainable
Value leakage is not the difference between reality and omniscience. It is not a claim that every unrealized theoretical possibility should have been captured.
The relevant comparison is a better enterprise state that was reasonably attainable given the enterprise’s actual circumstances and a feasible higher-quality movement through them. This keeps the concept economically disciplined.
The economic object extends beyond the focal objective
A consequential move changes more than the metric named in its business case.
Focal-objective value concerns the stated result the move was intended to improve. Enterprise-state value concerns what the move does to capabilities, architecture, data, dependencies, bottlenecks, portfolio position, options, and future reachability. Coherence-capacity value concerns whether the move leaves the enterprise better able to navigate later systemic movement.
These are not necessarily additive monetary buckets. They identify economically relevant parts of the enterprise answer that a narrow project frame can omit.
Leakage can compound
Every consequential move changes the state from which later moves begin. Leakage can therefore persist beyond the focal investment.
An inferior path can harden architecture, consume scarce change capacity, delay learning, foreclose options, fail to create reusable capability, or make later moves more expensive. Better value capture can compound in the opposite direction through learning, enabling assets, shared capabilities, improved reachability, and stronger future coherence capacity.
Relationship to systemicity, incoherence, and coherence
Systemicity makes enterprise value more sensitive to relationships, configuration, path, sequence, learning, and future state. Incoherence describes economically material inadequacy in how the enterprise navigates that reality.
Coherence improves both sides of the value-capture problem. It protects value on paths the enterprise actually takes, and it improves the discovery and construction of valuable paths that otherwise never become real.
Bibliography
Adjacent intellectual terrain includes opportunity cost, real options, capital allocation, complementarities and configuration, portfolio interaction, path dependence, dynamic capabilities, exploration and exploitation, innovation search, absorptive capacity, organizational learning, transaction-cost economics, and work on value creation and value capture.