[Case by case #12] Marek Reuter: Nexans - Steering profitability and sustainability through complexity reduction

In a recent teaching case published by Harvard Business Publishing (1), Marek Reuter, Assistant Professor at EDHEC, together with colleagues from HEC Paris, examine how Nexans, a global cable manufacturer that reinvented itself around the purpose of “electrifying the future,” (2) rethought the way it manages profitability, complexity and environmental performance.

At the heart of the case is a fundamental managerial challenge: how to transform organisations so that financial performance and environmental performance improve together. In many industrial organisations, these objectives are still perceived as being in tension, as sustainability initiatives often appear costly, operationally disruptive, or difficult to scale.

Nexans addresses this challenge by fundamentally rethinking how the business grows. Rather than pursuing volume, the company focuses on creating more value with fewer, more focused activities – using complexity reduction as a central lever to improve both profitability and environmental performance.

In this interview, Marek Reuter, explains how the case helps students explore how such a transformation can be orchestrated – and how management accounting and control systems can actively shape and steer this transformation in practice.

Nexans speaks of “growth in value rather than volume”. What does that mean in practice?

Marek Reuter: For many industrial companies, growth is still a central premise – selling more units, expanding the customer base and entering new markets. Nexans decided to challenge that logic. Under the premise “Simplify to Amplify,” the company, for example, removed over 13,000 of its initial 17,000 customers, reduced the number of product SKUs by nearly 40%, and moved from 25 to only four main business areas.

In practice, this meant accepting that not all growth is desirable. Some activities generate high volumes but very little value once the operational complexity behind them is taken into account. Others may be smaller in scale but contribute much more strongly to profitability, strategic positioning, and a lower environmental footprint.

Indeed, many sources of operational complexity also carry hidden carbon costs: inefficient production processes, frequent machine changeovers, fragmented product portfolios, and unnecessary logistics flows all increase energy use and emissions. By identifying and reducing these sources of complexity, the company could simultaneously improve profitability and reduce the carbon intensity of its operations.

This is why complexity reduction becomes a powerful lever for both increased profitability and sustainability. By simplifying product, customer and supplier portfolios, Nexans managed to streamline production, reduce waste and transport, and ensure that future growth is built on activities that are both economically valuable and environmentally more efficient.

The case thus seeks to illustrate how a large industrial organisation can redesign its growth model so that profitability and decarbonisation reinforce each other rather than compete.

In your pedagogical case, however, such “complexity” reduction is depicted as a non-trivial concern. Why is it so difficult for companies to see and manage complexity costs?

Marek Reuter: Complexity tends to accumulate gradually inside organisations. Over time, companies add product variants, customer-specific solutions, local adaptations or special processes. Each of these decisions may seem justified individually, but collectively they create operational burdens that are rarely visible in traditional performance metrics.

In Nexans’ case, complexity manifested itself in many forms: highly fragmented product portfolios, small production runs, frequent changeovers in factories, and supply chains that became increasingly difficult to coordinate. These operational frictions not only increase costs but also raise the environmental footprint of production through higher energy consumption, more material waste, and additional transport.

The difficulty is that conventional management systems do not always capture these effects very well (3). Financial indicators often aggregate costs at a relatively high level, and environmental impacts are rarely traced back to specific products, customers or operational choices. As a result, the link between complexity, profitability and carbon emissions often remains hidden.

The case invites students to look more closely at these dynamics and to think about how management control tools can make both the financial and environmental consequences of complexity visible – and therefore manageable.

The case emphasises that sustainable business transformation at Nexans was 'orchestrated' via management accounting and control. How did Nexans redesign its management control system to support the Shift programme?

Marek Reuter: To operationalise this transformation, Nexans introduced its “Shift programme”, a company-wide initiative designed to steer profitability and decarbonisation simultaneously (4). A key element of this programme is the redesign of the management control system used to guide the organisation. One important feature of the Shift programme is the way performance is visualised and compared across industrial sites. Plants are positioned in a two dimensional framework that combines a range of financial performance metrics with environmental indicators. This way of representing performance allows plants to be grouped into distinct clusters, enabling managers to see which sites combine strong profitability with relatively low emissions, and which ones face more difficult trade-offs.

The framework is not just descriptive. It is used as a decision tool that guides managerial attention and resource allocation. Each performance cluster follows a distinct transformation pathway consisting of specific levers. Sites that perform well on both dimensions are encouraged to scale up and capture additional growth opportunities. Others are asked to first decomplexify their operations before they are allowed to grow again, to ensure that any future growth is decarbonised growth.

Another important design choice is the level of granularity at which performance is analysed. Rather than relying only on aggregated financial indicators, the system pushes analysis down to product families and operational processes. This makes it possible to identify where complexity arises – for example through small production runs, frequent changeovers, or highly customised products – and to link these operational patterns to both cost and emissions.

For students, the case therefore illustrates how management control systems can actively shape strategic transformation. The tools are not only used to report results; they structure how managers diagnose problems, prioritise actions, and coordinate decisions across a very large industrial network.

Students work with a fairly detailed dataset and Excel model in this case. What do they actually do?

Marek Reuter: While the case provides plenty of opportunity for discussion in class, we also wanted it to be quite hands-on. Students receive operational and environmental data and work through a series of analyses in Excel. They examine product-level emissions, analyse the performance of different business segments, and explore how changes in the product portfolio or industrial footprint might affect both profitability and carbon intensity.

We felt it was important to include this analytical component. There are many sustainability cases today, but quite often the discussion remains conceptual. In practice, however, managerial decisions depend heavily on quantitative analysis.

Working through the data themselves allows students to discover in their calculations that more restrained growth can indeed drive both profitability and environmental performance. The spreadsheet therefore becomes a way of grounding the overarching organisational and strategic discussion in concrete numbers.

The case suggests that reducing complexity can improve both profitability and environmental performance. Does that necessarily mean the industry becomes more sustainable overall?

Marek Reuter: Not necessarily. One of the interesting discussions that emerges in class concerns what happens beyond the boundaries of the company.

If Nexans decides to exit certain low-value or highly complex activities, those products do not simply disappear from the market. In some cases, they may be produced by competitors instead. From a system-level perspective, this raises legitimate questions about whether environmental impacts are actually reduced or simply displaced.

We encourage students to reflect on this issue. The case illustrates how companies can align financial and environmental objectives within their own operations, but it also highlights the limits of firm-level action when broader industry dynamics remain unchanged.

These tensions often lead to some of the most insightful classroom discussions and encourage a broader reflection on the sustainability challenge – not only as a question of reducing complexity within organisations, which can be a powerful lever, but also of how such choices play out across industries and value chains.

References

(1) Nexans: Orchestrating sustainable business transformation (2025). By: Sebastian D. Becker, Marek Reuter, Rodolphe Durand - https://hbsp.harvard.edu/product/HEP113-PDF-ENG

(2) Electrify the future: a new chapter in Nexans Living History (2021) - https://www.nexans.fr/en/newsroom/news/details/2021/01/The-new-chapter-of-Nexans-Living-History.html

(3) Wilson, Stephen A., and Andrei Perumal. Waging War on Complexity Costs (PB). McGraw Hill Professional, 2009 - https://www.abebooks.com/9780071639132/Waging-Complexity-Costs-Reshape-Cost-0071639136/plp

(4) “What is the SHIFT program” - https://www.nexans.com/finance/why-invest-in-nexans/our-transformation-story/