Incubator Blogs: NEXUS team Causality On a mission to kick management accounting out from the 1920’s and into 2023

“Did you know that every time a manager in a company looks at accounting data for strategic decision-making purposes, they’re doing management accounting?” Robert Eden, co-founder at team Causality, asks. “Furthermore, were you aware that most companies – SMEs in particular – rely on management accounting methods that have both barely evolved since their invention in the 1920’s and produce information that nearly all accounting professionals know is inaccurate?

“Imagine: it’s as if people working in futuristic high-tech offices still commuted to their jobs in a busted-up Ford Model T,” he continues, clearly frustrated, before asking: “Don’t you think that’s strange? We certainly do.”

The “we” Eden is referring to is his team, Causality. Consisting of Eden and co-founder Heidi Vaarala, an experienced design director who he met in early 2022, Causality are working on a solution using digital twins, computer modelling, and other technologies to modernise management accounting and make it more accessible, accurate and pertinent to the vast number of SMEs out there.

With over 15 years of experience as an accountant and CFO in SMEs both in the UK and in Finland, Eden had spent well over a decade wrestling with the problem of producing useful management accounting information and trying to come up with a solution. When he eventually came up with the outline of a software-based solution, he reached out to Vaarala’s firm to commission a prototype of the tool he’d envisaged.

The solution’s importance was instantly apparent to Vaarala, who had recently completed her EMBA and done a lot of work involving business models. As the pair worked on the prototype and their mutual interest in the subject matter became apparent, their relation grew from a client-consultant relationship into a partnership. Now the duo complements each other, bringing their combined decades of experience to address the issue at hand. Together, they’ve spent the duration of the University of Helsinki’s NEXUS incubator programme refining their offering with the help of NEXUS mentors Laura Inamedinova of LKI Consulting and Tuomas Oksanen of Grid.vc.

Returning to the problem, Eden explains that the biggest challenge in management accounting is that the raw accounting data is always chopped up and presented in a jumbled-up manner, making any kind of decision-making based on said data fraught with peril and lacking any reliability.

Oksanen agrees: “As a venture capital investor, I’m very aware of the risks of poor decision making. Any decision making can only be as good as the information it’s based on, and with SMEs, the problem often is that the information is both limited and distorted due to the cost, time, and knowledge required to prepare accurate, easily parsed information. Of course, we can always get lucky and make a good decision based on limited and distorted information, but the chances of us being able to do that consistently are low.”

The team’s solution to this issue is centred around modelling the internal processes of a company and connecting them to the overall business model. The focus is on what the company does and why they do it – the causes – and only then on what the resulting costs, or effects, are. Hence the name: Causality.

“The core technique itself isn’t new,” Eden explains. “It was developed 30+ years ago as Activity Based Costing. It was a huge success in its day but fell out of favour because it was labour-intensive and costly to maintain. By the time a better version called Time-Driven Activity Based Costing came along in 2007, the audience had already left the building and never really came back. Everyone just went back to their Model T’s.”

By taking the improved core methodology of TDABC and using modern technologies like cloud computing as well as modern UI/UX design methods, the team has created a solution which addresses all the reasons that originally led to ABC falling out of favour decades ago.

“Modelling a business produces large amounts of data, and it is imperative that we provide the user with a framework, or ‘container,’ that helps them perceive links between data points and the information content held within the data sets,” Eden lays out. “That’s why Heidi’s experience in UI/UX design is invaluable for the success of the project.”

Causality’s focus on making their solution easy to understand is also key to another core aspect of their offering: co-creation.

“Co-creation has been behind some recent successes such as Figma, Miro, and Pipedrive, and something we feel will transform the way management accounting is done,” Eden explains. “The primary management accounting tool today is Excel, and anyone who has ever tried to add something to someone else’s complex Excel sheet knows, ‘don’t touch’ is the best policy. Turning data into an easy-to-understand visual model makes inviting others to work on it possible and enables them to add their bit to where they have the necessary expertise.”

For Causality, joining NEXUS was the result of a happy coincidence. The team were by chance introduced to Programme Manager Andres Archila in the summer of 2022, and after introducing their idea and asking for insights on how startups might benefit from their tool, they were surprised to receive both genuine feedback as well as an invitation to join the Kumpula Campus based incubator programme. “Which of course we did,” Eden adds emphatically.

But the happy coincidence turned to be a very important one as well. Throughout the programme, the team has received valuable advice from both their mentors and visiting NEXUS experts which led to the team pivoting their idea away from startups and refocusing on SMEs.

“My original struggle to create high-quality management accounting information in an SME setting came back into focus,” Eden explains. “We realized that if I was struggling, then hundreds of thousands of other accountants, CFOs, Financial Controllers, and entrepreneurs out there must be struggling too. We found ourselves a universal problem to fix, and what’s more, we realized it was a problem companies would pay good money to fix.  We owe a great thanks to all the mentors in the program for this realization.”

The team’s objective now is to turn their solution into a SaaS offering primarily for SMEs, but also for the consultants who help them. As their tool is unfamiliar to companies, Eden believes that a pool of trained consultants will be needed to kick-start their go-to-market phase. As the programme nears its end, Eden has been actively going out to early customers to test their methodology on Finnish SMEs, modelling their businesses “in Excel, until we have a software solution to do it in” gathering valuable feedback – as well as consulting fees to keep them going.

As Oksanen explains, he sees that Causality will likely benefit from a larger megatrend of “enterprise metaverses”, where enterprises are using digital twins to model their resources and processes in their never-ending quest for better efficiency. The underlying methodology is proven and tested, but the approach is novel and enables better inclusion of the whole organization to the decision making.  “Perhaps with this solution we could get rid of siloed information and distant ivory towers where the decision making is detached from the actual operations altogether? Causality could very well use as a slogan the epitaph written in President Paasikivi’s statue: “the source of all wisdom is acknowledging the facts”. And facts about your business is exactly what the team is providing – at low cost, when needed. Sounds quite interesting to me!” Oksanen muses.

Inamedinova, for her part, says that she has been proud to be a part of Causality’s journey, helping them refine their position and niche in a competitive SaaS B2B market, and believes that the help that she and her tech marketing & design agency’s team provided in developing Causality’s pitch deck will help them successfully tackle whatever challenges they case next.

The team’s next steps, according to Eden, will be to find both a CTO to head the development of their solution, as well as raise funding to do so. “We’re excited to turn all of those Model T’s into Teslas and kick management accounting out of the 1920’s, and bring them to the brave new world of 2023!” For those interested in finding out more about the company, Eden invites them to contact him through LinkedIn.