Booz & Company

1. London, September 2011 Booz & Company Succeeding in an Emerging Industry ARCSA Conference, September 27th, 2011 This document is confidential and is intended solely for the use and information of the client to whom it is addressed.

2. Why the rainwater industry is important to me • Live in Houston – last 11 months the driest in Texas since 1895 and hottest summer in history • Large water bill - ~$300 per month • Wife is a prolific sprinkler, but there are severe water restrictions and potential fines • Water will be the next high priced, scarce resource • Have built several businesses in emerging industries – lived through the good, the bad and the ugly…

3. Today’s discussion • Rainwater industry growing rapidly • Key factors for success in an emerging industry • Questions to consider

4. Rainwater industry growing rapidly Reported growth rates are explosive Annual growth rate % Most businesses are growing % growing 92% 2010 88% 93% 2009 35% 2005-2010 15% 79% Source: U.S. Rainwater Industry Analysis

5. U.S. rainwater market to exceed $1 billion by 2015 U.S. Market With Significant Growth Potential 100% = $426 Million Revenue, 2009 +15% annual growth rate $1B 35% 40% $426M 25% Residential 71 Commercial Government Total Market Tanks Labor 2009 2015 Accessories $2B at avg. reported growth rates Source: U.S. Rainwater Industry Analysis

6. Drivers of industry growth • Industry standards developing • Improving reliability of solutions • New technologies and product offerings • Robust industry value chain • Increasing water costs • Water scarcity • Desire to conserve • Growing awareness of rainwater solutions • Government incentives • Go local movement Supply side growth Demand side growth Industry Growth Source: U.S. Rainwater Industry Analysis

7. Robust industry value chain % surveyed participating in value chain 23% 80% 25% 35% 71% Wholesaler Designer Manufacturer Retailer Installer • Average number of employees per business = 14 ( range from 1 to 400) • 81% of businesses have certification or license • Over 50% are ARCSA certified • Average number of years in business = 6 years (range from 3 months to over 50 years) • Average number of systems installed per business per year = 40 • 62% of installations are active vs. passive Source: U.S. Rainwater Industry Analysis

8. Today’s discussion • Rainwater industry emerging and rapidly growing • Key factors for success in an emerging industry • Questions to consider

9. Feedback from rainwater businesses interviewed • Interviewed a cross-section of businesses (e.g., designers, manufacturers, distributors, installers) • Discussed biggest challenges and opportunities facing their businesses and the industry • Excited about the industry potential and facing many of the same challenges that other small businesses face in an emerging industry

10. Key factors for success in rainwater • Coherent business definition • Customer focus • Partnerships with real value • Digital capabilities • People (recruiting, developing and retaining)

11. 1. Coherent business definition needed “I need to figure out which customers to target – what industries, geographic focus, types of customers to go after” “I need to get clear on where I am taking my business” “Need to figure out who the customer is, architects, city, end customer?” “It’s easy to lose focus in our industry where there is so much opportunity” “I have no business plan yet, but I really need one, and I need capital for inventory, where will I get it?.” “In the U.S. cities and States keep changing policies, it is hard to decide where to focus” Source: Booz interviews

12. Winning with a coherent business The Power of Coherence How are we going to create value for our customers? Way To Play Product & Service Fit Right to Win Capabilities System What do we need to do well for our customers? What are we going to sell and to whom? Market Coherence - 11 -

13. Coherence creates more value for companies 32 Passenger Auto Indusry Consumer Packaged Goods Industry The Coca Cola Company 28 Porsche Toyota Clorox 24 Honda BMW Campbell’s P&G Nissan 20 EBIT % EBIT % Hyundai Wrigley’s 16 Kraft PepsiCo Heinz VW Kimberly Clark Mazda ConAgra 12 Mitsubishi Ford Nestle GM 8 Unilever Sara Lee 4 20 30 40 50 60 70 80 90 100 0 20 40 60 80 100 Portfolio Coherence Score Portfolio Coherence Score Sources: Booz & Company; Capital IQ; Bloomberg; Automotive analysis based on 2003-2007 financial data

14. Capabilities must support each other Example: The Pepsi-Frito Lay Capabilities System Direct-store delivery (DSD) allowing easy testing of new products by introducing them in a handful of stores Continuous innovation of new products with store level response information going directly to R&D Skillful global consumer marketing to rapidly build demand for initially successful products Way to Play Rapid innovation, distribution and marketing to stimulate and meet customer snacking needs

15. Building a coherent business • Define what your business stands for and what differentiates you from your competitors • Determine what products and services you will and won’t offer…focus is a good thing • Decide what skills and capabilities you need inside your organization…focus on those that will make you stand out…less is more • Put together a business plan with goals, timelines and a financial plan • Determine where you are going to get capital and find people to help you make it happen

16. 2. Customer focus critical to grow the industry “Biggest problem is awareness and education…people don’t realize rainwater is great resource” “We can’t put people at risk, we are talking about their drinking water.” “Everything depends on word of mouth, it’s critical I do the job right “Solutions need to be easy and complete at the right price” “People are actually coming back for more because they love the experience” “I stand for transparency, my reputation, customer service and I don’t burn my customers .” “We need to get more case studies out there so people see the benefit” “The best solution is a reliable one, it just works Source: Booz interviews

17. Zappos best-in-class customer service Zappos Service Principles Net Promoter Score : • “No questions asked” return policy • Customer-centric call center reps • Best-in-class product information • Real-time product availability NPS %

18. Delivering a winning customer experience Awareness and leads Conversion and transactions Installation and service Retention and loyalty • Understand marketing ROI • Decide where you are going to excel vs. just compete • Make the customer experience as simple and easy as possible, people want less interaction…not more

19. 3. Partnerships will help drive growth “We need more technical training available in the industry – partners should help.” “We need better defined specifications and standards.” “Regulatory groups are holding our growth back, we need to partner with them to grow the industry.” “We need to work together as an industry to grow the pie, that means teaming up with our competitors” “I always refer customers to my competitors when I can’t meet their needs…we need to support each other” Source: Booz interviews

20. Importance of partnering – PC industry example Vertical Integration Horizontal partner ecosystem Vs.

21. Partnering to grow • Look for a few win-win partnerships across the industry to grow… be careful not to over extend • Help set open standards and specifications that build credibility • Support competitors– the goal is to grow the pie • Invest the time to manage partnerships effectively – they take as much work or more than managing customers

22. 4. Digital capabilities will convert customers “The big challenge is going from awareness _ that’s a cool idea – to conversion, I want to buy a system” “Part of our mantra is to be green, that means we should be using online marketing, not paper” “Digital is one of my main marketing tools, I got 3X the clicks when I started blogging “We use twitter, Facebook, blogging, and online newsletters – this is the way to go” Source: Booz interviews

23. Digital important element in finding customers Marketing tools used today % using Digital tools Websites Referrals Networking events Internet advertising Local advertising Direct mail Source: Rainwater Survey

24. Digital tools connect businesses and consumers Digital Small business needs Consumer needs Mobility Social media E-commerce Cloud computing Benefit from digital world Save time and money Solutions to grow, transact and be efficient Connect and buy local Compete with big enterprise Get advice and direction

25. Social media example - Tumblr example Reasons for Success • Micro blogging for topics of interest, not friends • Simplicity - no learning curve, set up of a page takes minutes, little time and effort to maintain a page • Easy to share – Re-blogging and other social capabilities are native to the platform • Mobile device compatible – Unlike other blogging software, excels in usability on mobile devices Interface Actual blog Source: TechCrunch, BusinessInsider, Press Clippings

26. Tumblr growth impressive Vis a vis Facebook Tumblr Users vs. Facebook (Monthly Unique Users, million) WW WW US Source: Quantcast, Tumblr

27. Social monitoring – Bazaarvoice example • Leader in social monitoring and management (ratings and reviews) • 243 billion “conversations” to date • Social commerce partnerships with Facebook and Google • Authentic social monitoring • Helps small businesses be found • Increases conversion rate 77%

28. 5. Finding the right people is essential to growth “It’s hard to find people for this industry” “We are dealing with home owners here, this requires great people skills.” “It’s better to focus on fewer, high quality people than to overextend” “If I try to take on more jobs without the right people, my work quality will suffer.” “Finding people is the biggest barrier, they need to be passionate about water” Source: Booz interviews

29. Managing talent as you grow • Align • Vision • Strategic Plan • Performance Management • Workforce Planning • Skills and Roles • People Systems and Processes • Develop • On-boarding • Leadership Development • Learning & Training • Best Practice Sharing & Communication • Retain • Compensation • Incentives • Career Advancement • Succession Planning • Release Management • Attract • People branding • Sourcing • Recruiting • Motivate • Values • Purpose • Pride • Emotional Commitment • Psychic Reward

30. Today’s discussion • Rainwater industry emerging and rapidly growing • Key factors for success in an emerging industry • Questions to consider

31. Questions to consider • What products and services do I want to offer? • What types of customers do I want to target? • What makes me unique and valuable to my customers? • What are the capabilities I need to deliver value to my customers? • How will I create a great experience for my customers? • Who are the right partners to help me and the industry succeed? • How can I better leverage digital tools to build awareness, educate, convert, transact and retain customers? • How do I find the right people to help me succeed?