"Britain performing well in these Games is not the icing on the cake. It's pretty well the whole ingredient; it's crucial," Coe, the chairman of the 2012 organising committee, told UK Sport's annual major events conference, held in London.
"The Olympic and Paralympics Games are not just about full houses, great merchandise and profit. They are also about creating a well-stocked shop window for sport in the UK. The Games will not be a good Games if that shop window is empty, or if there is no evidence that more young people are taking up sport.
"The success of the Games will not be judged on how many new railway lines have been built, or how many hotel rooms have been filled."
Coe, a double Olympic champion, knows the British public will ultimately judge the success of 2012 on the number of domestic medal winners and he urged everyone involved in sport in the UK - from teachers to coaches and performance directors - to make every effort to produce the champions of the future. He knows from personal experience that the timescale is important. Seven years after winning at the English Schools' Athletics Championships, he took the 1500 metres gold medal at the 1980 Moscow Olympics.
"The Games are the biggest opportunity sport in this country has ever had. It is one we must not squander," said Coe, who acknowledged that the involvement of young people and the promise of a sporting legacy for future generations were two of the major reasons why the International Olympic Committee chose London to host the 2012 Games ahead of Paris.