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This is what happened when I cofounded LinkedIn. The key business model innovations for LinkedIn, including the two-way nature of the relationships and filling professionals’ need for a business-oriented online identity, didn’t just happen organically. They were the result of much thought and reflection, and I drew on the experiences I had when founding SocialNet, one of the first online social networks, nearly a decade before the creation of LinkedIn. But life isn’t always so neat. Many companies, even famous and successful ones, have to develop their business model innovation after they have already commenced operations. PayPal didn’t have a business model when it began operations (I was a key member of the PayPal executive team). We were growing exponentially, at 5 percent per day, and we were losing money on every single transaction we processed. The funny thing is that some of our critics called us insane for paying customers bonuses to refer their friends. Those referral bonuses were actually brilliant, because their cost was so much lower than the standard cost of acquiring new financial services customers via advertising. (We’ll discuss the power and importance of this kind of viral marketing later on.) The insanity, in fact, was that we were allowing our users to accept credit card payments, sticking PayPal with the cost of paying 3 percent of each transaction to the credit card processors, while charging our users nothing. I remember once telling my old college friend and PayPal cofounder/ CEO Peter Thiel, “Peter, if you and I were standing on the roof of our office and throwing stacks of hundred-dollar bills off the edge as fast as our arms could go, we still wouldn’t be losing money as quickly as we are right now.” We ended up solving the problem by charging businesses to accept payments, much as the credit card processors did, but funding those payments using automated clearinghouse (ACH) bank transactions, which cost a fraction of the charges associated with the credit card networks. But if we had waited until we had solved this problem before blitzscaling, I suspect we wouldn’t have become the market leader.

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1. REFERRALS FROM YOUR PROFESSIONAL AND PERSONAL NETWORKS. Create a list of the ten most talented people you know and commit to speaking with at least one of them per week for the next ten weeks. At the end of each conversation, ask, “Who are the most talented people you know?” Continue to build your list and continue to talk with at least one person per week. 2. REFERRALS FROM YOUR EMPLOYEES. Add sourcing as an outcome on every scorecard for your team. For example, “Source five A Players per year who pass our phone screen.” Encourage your employees to ask people in their networks, “Who are the most talented people you know whom we should hire?” Offer a referral bonus. 3. DEPUTIZING FRIENDS OF THE FIRM. Consider offering a referral bounty to select friends of the firm. It could be as inexpensive as a gift certificate or as expensive as a significant cash bonus.

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