Ex-England midfielder Cole, 33, has joined Coventry City on loan from Villa, who are 19th in the table with four points from nine games.
Grealish, 20, has scored one goal in six top-flight appearances this season and Cole said: "The gaffer loves him.
"He has gone beyond potential and is an important cog in the wheel at Villa."
Grealish made his Villa debut in the penultimate game of the 2013-14 Premier League season but played a more prominent role last season as the club narrowly avoided relegation and reached the FA Cup final.
He recently opted to play for England, despite having turned out for the Republic of Ireland at Under-21 level.
Cole, a former West Ham, Chelsea and Liverpool player, added: "When you step into that world of Premier League football the expectancy levels are massive and someone with the ability levels of Jack, the expectancy levels go up so you need to have the mentality to cope.
"It is important that the club build the team around him. I think they have the perfect gaffer for him.
"He is going to be a massive player for Villa over the future."
Villa won their opening league game of the season but have since lost seven and drawn one of their following eight games.
Sherwood has come under pressure but Cole has backed the 46-year-old to avoid relegation with the West Midlands club.
"The manager has a lot of qualities he brings to the table and he is also getting better everyday," said Cole.
"He is learning the trade himself. But he is definitely good enough to keep Villa up."
Joe Cole believes Aston Villa manager Tim Sherwood plans to build a team around midfielder Jack Grealish as the club fight for Premier League survival.