Booz & Company

Booz & Company

This document is confidential and is intended solely for the use and information of the client to whom it is addressed.

London, September 2011

Succeeding in an Emerging IndustryARCSA Conference, September 27th, 2011

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

2005-2010 15%

2009 35%

2010 88%

Reported growth rates are explosiveAnnual growth rate %

92%

Source: U.S. Rainwater Industry Analysis

Most businesses are growing% growing

93%

79%

U.S. rainwater market to exceed $1 billion by 2015

5DATE

130

225

0

200

400

600

800

1,000

+15% annual growth rate

2015

$1B

2009

$426M71

With Significant Growth Potential

Total Market

Government

Commercial

Residential

35%

25%

40%

Accessories

Labor

Tanks

U.S. Market

100% = $426 Million Revenue, 2009

$2B at avg. reported growth rates


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Drivers of industry growth

•Increasing water costs

•Water scarcity

•Desire to conserve

•Growing awareness of rainwater solutions

•Government incentives

•Go local movement

Demand side growth•Industry standards developing

•Improving reliability of solutions

•New technologies and product offerings

•Robust industry value chain

Supply side growth

Industry Growth


Robust industry value chain

Designer

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

80%

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Manufacturer Wholesaler Retailer Installer

23% 25% 35% 71%

% surveyed participating in value chain


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• Rainwater industry emerging and rapidly growing



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

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Key factors for success in rainwater

1. Coherent business definition

2. Customer focus

3. Partnerships with real value

4. Digital capabilities

5. People (recruiting, developing and retaining)

1. Coherent business definition needed

Source: Booz interviews

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“I need to get clear on where I am taking my business”

“I have no business plan yet, but I really need one, and I need capital for inventory, where will I get it?.”

“I need to figure out which customers to target – what industries,

geographic focus, types of customers to go after”

“It’s easy to lose focus in our industry where there is so

much opportunity”

“In the U.S. cities and States keep changing policies, it is hard to decide

where to focus”

“Need to figure out who the customer is, architects, city,

end customer?”

Winning with a coherent business

- 12 -

The Power of Coherence

Right to Win

How are we going to create value for our

customers?

What do we need to do well for our customers?

What are we going to sell and to whom?

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Coherence creates more value for companies

32

28

24

20

16

12

8

Portfolio Coherence Score

100806040200

P&G

ConAgra

Kraft

Unilever

PepsiCo

Clorox

Sara Lee

HeinzKimberly Clark

Wrigley’s

The Coca Cola Company

Nestle

Campbell’s

Consumer Packaged Goods Industry

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Sources: Booz & Company; Capital IQ; Bloomberg; Automotive analysis based on 2003-2007 financial data

EB

IT %

-10

-8

-6

-4

-2

0

2

4

6

8

10

12

14

16

18

20

22

Portfolio Coherence Score

1009080706050403020

GM

ToyotaPorsche

Nissan

MitsubishiMazda

Hyundai

Honda

Ford

BMW

Passenger Auto Indusry

VW

EB

IT %

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Capabilities must support each other

Example: The Pepsi-Frito Lay Capabilities System

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

Direct-store delivery (DSD) allowing easy testing of new products by introducing them in a handful of stores

Way to PlayRapid innovation, distribution and marketing to stimulate and meet

customer snacking needs

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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

2. Customer focus critical to grow the industry


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“I stand for transparency, my reputation, customer service and I

don’t burn my customers .”

“We can’t put people at risk, we are talking about their drinking water.”

“Biggest problem is awareness and education…people don’t

realize rainwater is great resource”

“The best solution is a reliable one, it just works

“Solutions need to be easy and complete at the right

price”

“We need to get more case studies out there so people

see the benefit”

“People are actually coming back for more because they

love the experience”

“Everything depends on word of mouth, it’s critical I

do the job right

Booz & Compa

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Zappos best-in-class customer service

:

“No questions asked” return policy

Customer-centric call center reps

Best-in-class product information

Real-time product availability

Net Promoter Score

18

7477

90

0

10

20

30

40

50

60

70

80

90

100

NPS %

Zappos Service Principles

Delivering a winning customer experience

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Installation and service

Conversion and transactions

Awareness and leads 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

3. Partnerships will help drive growth


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“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”

“We need more technical training available in the

industry – partners should help.”

“I always refer customers to my competitors when I can’t meet their

needs…we need to support each other”

Importance of partnering – PC industry example

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Vertical Integration

Horizontal partner ecosystem

Vs.

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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

4. Digital capabilities will convert customers


22

“Digital is one of my main marketing tools, I got 3X the

clicks when I started blogging

“The big challenge is going from awareness _ that’s a cool idea – to

conversion, I want to buy a system”

“We use twitter, Facebook, blogging, and online newsletters –

this is the way to go”

“Part of our mantra is to be green, that means we should be using

online marketing, not paper”

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Digital important element in finding customers

19%

25%

29%

57%

78%

80%

Networking events

Referrals

Websites

Internet advertising

Local advertising

Direct mail

Marketing tools used today% using

Source: Rainwater Survey

Digital tools

Digital tools connect businesses and consumers

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DigitalSmallbusiness needs Consumer needs

Mobility

Social media

E-commerce

Cloud computing

Connect and buy local

Save time and money

Get advice and direction

Compete with big enterprise

Benefit from digital world

Solutions to grow, transact and be

efficient

Social media example - Tumblr example

25DATE

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

Source: TechCrunch, BusinessInsider, Press Clippings

Actual blog

Interface

Tumblr growth impressive Vis a vis Facebook

DATE26

Tumblr Users vs. Facebook(Monthly Unique Users, million)

Source: Quantcast, Tumblr

WW

WW

US

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%

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5. Finding the right people is essential to growth


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“We are dealing with home owners here, this requires great

people skills.”

“If I try to take on more jobs without the right people, my work quality will

suffer.”

“It’s hard to find people for this industry”

“It’s better to focus on fewer, high quality people

than to overextend”

“Finding people is the biggest barrier, they need to be passionate about water”

Booz & Compa

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Managing talent as you grow

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

Align• Vision• Strategic Plan• Performance Management• Workforce Planning• Skills and Roles• People Systems and Processes

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• Rainwater industry emerging and rapidly growing



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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?

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