Innovation for Growth: Transforming, Expanding, and Optimizing Business

1. Perceptics innovation with G7February 2013

2. Successful innovators manage a portfolio of initiatives across ambitions... TRANSFORMATIONALDeveloping breakthroughs and inventing things for markets that don’t yet exist See the May 2012 issue of Harvard Business Review for “Innovation for the Risk Averse” by Monitor Innovation CREATE NEWMARKETS, TARGET NEW CUSTOMER NEEDS ADJACENT Expanding from existing business into “new to the company” business ENTER ADJACENTMARKETS, SERVE ADJACENT CUSTOMERS WHERE TO PLAY COREOptimizing existing products for existing customers SERVE EXISTINGMARKETS AND CUSTOMERS USE EXISTING PRODUCTS AND ASSETS ADD INCREMENTAL PRODUCTS AND ASSETS DEVELOP NEW PRODUCTS AND ASSETS HOW TO WIN

3. On average, a balanced portfolio likely has about 70% of activity happening in the Core; 20% in Adjacent; and 10% in Transformational. The best innovators are explicit about their activity and resources across different ambition levels… Return on investment

4. Successful innovators innovate beyond products and integrate multiple types... NetworkConnections with others to create value Process Signature or superior methods for doing your work Product System Complementary products and services Channel How your offerings are delivered to customers and users CustomerEngagement Distinctive interactions you foster Profit Model The way in which you make money Structure Alignment of your talent and assets Product Performance Distinguishing features and functionality Service Support and enhancements that surround your offerings Brand Representation of your offeringsand business

5. The Ten Types of Innovation™ — rigorous, comprehensive, practical. PremiumCost LeadershipScaled TransactionsMicrotransactionsForced ScarcitySubscriptionMembershipInstalled BaseSwitchboardAuctionUser-DefinedFreemiumFlexible PricingFloatFinancingAd-SupportedLicensingMetered UseBundled PricingDisaggregate PricingRisk Sharing Merger/AcquisitionConsolidationOpen InnovationSecondary MarketsSupply Chain IntegrationComplementary PartneringAlliancesFranchisingCoopetitionCollaboration Organizational DesignIncentive SystemsIT IntegrationCompetency CenterOutsourcingCorporate UniversityDecentralized ManagementKnowledge ManagementAsset Standardization Process StandardizationLocalizationProcess EfficiencyFlexible ManufacturingProcess AutomationCrowdsourcingOn-Demand ProductionLean ProductionLogistics SystemsStrategic DesignIntellectual PropertyUser GeneratedPredictive Analytics Superior ProductEase of UseEngaging FunctionalitySafetyFeature AggregationAdded FunctionalityPerformance SimplificationEnvironmental SensitivityConservationCustomizationFocusStyling ComplementsExtensions/Plug-insProduct BundlingModular SystemsProduct/Service PlatformsIntegrated Offering Try Before You BuyGuaranteeLoyalty ProgramsAdded ValueConciergeTotal Experience ManagementSupplementary ServiceSuperior ServicePersonalized ServiceUser Communities/Support SystemsLease or LoanSelf-Service DiversificationFlagship StoreGo DirectNon-Traditional ChannelsPop-up PresenceIndirect DistributionMulti-Level MarketingCross-sellingOn-DemandContext Specific Experience Center Co-BrandingBrand LeveragePrivate LabelBrand ExtensionComponent BrandingTransparencyValues AlignmentCertification Process AutomationExperience SimplificationCurationExperience EnablingMasteryAutonomy and AuthorityCommunity and BelongingPersonalizationWhimsy and PersonalityStatus and Recognition

6. The average innovator tends to pursue product-based innovation which integrates few other types… Relative incidence among sampled companies 100 0

7. …but the most successful innovators in the world have figured out to work more evenly across their business system to create lasting competitive advantage, leveraging 2X the number of Types. Relative incidence among top innovators 100 4.5x 3x 9x 3x fixed 2x 3.5x 2.5x 2x 1x 0

8. As you increase in your level of ambition, you need to be more disruptive to existing business models and need to think about layering in more and more Types TRANSFORMATIONAL FOR TRANSFORMATIONAL INNOVATION You will need 6+ Types,working across the system FOR ADJACENT INNOVATION ADJACENT (1) You’ll need 3-4 Typeseither focused on Experience (for 1), Configuration or Offering (for 2) or everywhere (for 3) (3) FOR COREINNOVATION (2) CORE You’ll need 1-2 Typesand it’s okay to stay close to products or marketing Specific Types used above are for illustrative purposes

9. Where has Perceptics innovated to date? • Introduced Money-Back-Guarantee (w/o any measurable success) • Performed supplementary services (installed/updated PC s/w for CBSA) • Transitioned from direct sales to only using channel partners already established in their respective market segments (starting with Commercial Vehicle Enforcement) • Premium price for higher performance and longer product life (lower cost of ownership) • … • … • … • … • Partnered with Fairbanks Scales to meet CBP’s service requirements • Improving the LPR to 95%+ read-rate, • Extending the operating temperature of the UVIS to -40°F to +158°F, • Developed Arabic OCR and color LPR for MENA region • Developed a high-speed version of the DOT reader • Integrating third-party technologies (RFID readers, IP cameras, printers, readers), • Fully integrated LPR, UVIS, CCR, DOT, Driver Camera, etc. • … • … • … • …

11. Innovation “food for thought”

12. Potential G7 innovation stemming from product INNOVATION STEMMING FROM PRODUCT • Product Performance: • G7 attributes: Smaller and more compact, highly configurable, easy to integrate, easy to install, minimal training, etc • Other attributes to be considered and leveraged? • Product System: • Product configurations to cover existing offerings: So far, six different AVP/Imager combinations have been identified to cover all of the current products (SCN, DVR/ RetroHR, LPR-HRS/ CCR, LPR-HRSc, LPR-HR/ DOT/ UVIS, LPR-ID/ LPR-EZ) • Product configuration to cover new offerings: So far, three different AVP/Imager combinations have been identified to cover new products (LPR-AC, SCN-HR, LPR-HD) • Does G7 enable better Perceptics bundling with Systems Integrator solutions?

13. Potential G7 innovation stemming from the customer experience EXPERIENCE CENTRIC • Customer Engagement • Customer experience simplification: The G7 can significantly simplify the initial install and start-up, including ease of install due to compactness, ease of integration and configuration, and minimal training • Channel • Which configurations available to which customers/ channels? • Channel partner proactivity and stickiness: Given the installation and start-up simplification, channel partner proactivity and stickiness should increase, resulting in greater pursuits, proposals, wins and revenue • New channel partners: Does G7 open up channel partner alternatives, previously not considered or possible? • Service • Consider offering “proof of concept” or “try before you buy” • Does G7 allow ways to enhance the service experience? Shift anything to self-service? • Brand • Consider branding alternatives: Consider how G7 might be branded: Brand status quo (as Perceptics), consider co-branding alternatives, consider private label alternatives

14. Potential G7 innovation stemming from the business model BUSINESS MODEL-CENTRIC • Profit model – Consider pricing model alternatives: • Existing products: Replace existing products with G7 configurations, determine whether to raise, keep, or lower prices; consider timing of replacement and pricing changes • New products: Determine pricing strategies for new G7 configurations • New pricing alternatives: Consider BOOM/ “pay by the drink” pricing alternatives • Network: • Consider new alliance alternatives: Consider whether G7 presents opportunities to strike new/ different alliances, than those that have been contemplated to date • Does G7 change the way we collaborate with business partners? • Consider acquisition alternatives: Determine whether G7 helps identify acquisition alternatives • Structure: • Should G7 cause the Perceptics organizational structure to change? • Process: • Leaner/ simplified manufacturing process • More efficient installation process • More efficient maintenance process • Changes to any QA processes?

15. What innovation scenarios can be considered for G7 TRANSFORMATIONALDeveloping breakthroughs and inventing things for markets that don’t yet exist CREATE NEWMARKETS, TARGET NEW CUSTOMER NEEDS ADJACENT Expanding from existing business into “new to the company” business ENTER ADJACENTMARKETS, SERVE ADJACENT CUSTOMERS WHERE TO PLAY COREOptimizing existing products for existing customers SERVE EXISTINGMARKETS AND CUSTOMERS USE EXISTING PRODUCTS AND ASSETS ADD INCREMENTAL PRODUCTS AND ASSETS DEVELOP NEW PRODUCTS AND ASSETS HOW TO WIN