Networked Business Defined

In my recently published research agenda, one of the topics that I included was networked business. I gave a brief definition of the term in that post, but realized that it would be useful to go a bit deeper. My goal is to make sure that Gigaom Research clients and followers would have a solid, base understanding of the term whenever I use it in the future.
What is ‘networked business’? Much academic work has been done to define this term in the last two decades. However, rather than forge a consensus definition from multiple opinions, I decided to build my own in 2012, based on the dictionary definition of each component of the term.
However, I quickly found that there is not a single definition for each word. Every dictionary that I referenced offered a slightly different, nuanced version of what the words ‘network’ and ‘business’ mean. In the end, I decided to work with definitions from Snappy Words, a free online visual dictionary. Snappy Words consistently offers thoughtful, refreshing definitions that go beyond the ordinary ones proposed in more traditional dictionaries. Here are the Snappy Words definitions I chose to start from:
network (n.) – an interconnected system of things or people
business (n.) – a commercial or industrial enterprise and the people who constitute it
The Snappy Words meaning of ‘business’ cited above is a good example of how their definitions are different. Most traditional dictionaries do not reference ‘people’ in their definitions of ‘business’. The central point of the Social Business movement was (and is) that people matter quite a lot in business. As is often the case, Snappy Words has done the best job of incorporating recent thought into their definitions.
Back to the task of creating a definition for ‘networked business’ from those for ‘network’ and ‘business’. Combining the two definitions was not as straight-forward as you might think. The complicating factor is which part of speech should emphasized, the adverb (‘networked’) or the object (‘business’). If the object is highlighted, the resulting definition of ‘networked business’ best applies to a single organization. If the adverb (or state) is deemed most important, then the definition most accurately describes an ecosystem
So we really need two definitions for ‘networked business’. Here are the ones that I have proposed:
networked business (n.) –  a company whose value-producing assets are connected to each other and with those of other organizations
networked business (a.) –  a state in which an interconnected system of organizations and their value-producing assets are working toward one or more common objectives
The first definition is about an individual business and the connected state it is in, internally and externally. A networked business views its organizational units as both independent silos and connected network nodes. It treats its people like individuals and co-dependent employees. The networked business sees itself as a separate entity, as well as a partner with other organizations.
The second definition speaks to the larger concept of networked business. It describes the collaborative ecosystem in which individual networked businesses work together to create and capture value. It is a philosophical objective and, if successfully achieved, an operational reality of how business is done in the early 21st century.
These definitions have held up well in the three years since they were written and first published. That said, any definition should be subject to change, as the thing that it is attempting to define morphs over time.
What do you think about these two definitions of ‘networked business’? What do you specifically like or dislike? Are there things that would you add? Please leave comments and suggestions below. Thanks!

South Carolina tells Uber to shut down in the state

On Thursday, South Carolina’s Public Service Commission (PSC) issued an order for Uber to cease operations. The state governing body warned the company to stop its service immediately and not to resume until all its driver partners have proper certification. In the directive, the PSC said, “Consumers benefit from, and deserve choices in, the marketplace. However, those choices must be consistent with state law intended to protect the public.”It’s not the only local government that feels that way. State governor Nikki Haley, however, didn’t feel the same. She sent a letter to the PSC Friday expressing disapproval at the decision.

Here’s the problem with the way Uber vets drivers

After Uber was sued by San Francisco and Los Angeles Tuesday, there was a fair amount of confusion over the nature of background checks, one of the key factors the district attorneys cited in filing the suit. The questions immediately flooded my Twitter feed, such as: What’s the problem? How do Uber’s checks differ from taxi companies? Why do the DAs care?

A year ago, I learned more than I ever wanted to about background checks, following a big investigation into Uber’s practices. So I drafted a primer to get you up to speed on one of the key issues in the dispute between Uber and local governments.

Why are San Francisco and Los Angeles unhappy with Uber’s background checks?

They’re not unhappy with Uber’s background checks themselves — they’re upset at the way Uber markets them to customers. Uber has said it has the “safest rides on the road” and charges a $1 Safe Rides fee to fund its checks. But in actuality, Uber’s background checks, conducted through a company called Hirease, are arguably not as thorough as the one taxis do in California.

Wait — what? Aren’t all background checks the same?

Background checks come in all shapes and sizes. You can pay a private investigator more than $1,000 to dig into every aspect of a person’s life. You could drop $15 on a dirt-cheap consumer agency that gathers their records from the internet. Or you could spend $60-$90 on Live Scans, which go through official Department of Justice and FBI databases.

This Live Scan thing sounds good. What’s that?

It’s the only way to comb official federal, state, and county records. Live Scans use candidates’ fingerprints and update after the fact, so if someone commits a crime in the months or years after they’ve been hired, their employer will be notified. Live Scans are the standard for teachers, medics, and other professionals who work with vulnerable populations.

In California’s major metropolitan cities, taxi companies are legally required to Live Scan all drivers. Transportation is regulated by different entities depending on the state, so taxis in other places have different background check standards. In some places, Uber does a more thorough background check than taxis, but not in California.

I’m confused. If taxi companies legally have to do Live Scans in California, why doesn’t Uber?

When ridesharing was legalized in California, it was put under the jurisdiction of the California Public Utilities Commission (CPUC), which regulates certain transportation options like limousine services and trains. In California different entities — the municipal transportation authorities, like the SFMTA — regulate taxis. The CPUC decided that ridesharing companies would be held to less strict standards for background checks than taxi companies.

What does Uber use instead?

Uber uses a private background check company called Hirease. Without fingerprints, Hirease runs drivers’ social security numbers through the type of records databases held by credit agencies. There are some big limitations to this. Sometimes they’re outdated or incomplete, since they aren’t accessing official government databases. The records can come from dubious sources, like Internet crawls. Such credit checks can legally only go back seven years in a person’s history (whereas Live Scans don’t have a time limit). And if a driver commits a crime after Hirease runs its initial background check, Uber won’t know.

Uber told me it does occasionally re-run its driver background checks to deal with this issue. Uber is on track to complete more than 2 million background checks in 2014, so that’s no small feat.

If Live Scans are best in class, why doesn’t Uber use them?

Uber argues, and rightly so, that the DOJ and FBI databases are flawed. Counties don’t always regularly report their records to the state, so information gets outdated. Hirease sends runners in person to pull court records of each Uber applicant in the counties they’ve lived in. That might be a better system, although it has some obvious weaknesses (what if someone commits a crime in a county they weren’t a resident of?).

Still, Live Scans are the industry standard for employees in sensitive job roles, and if Uber wants to be “industry leading,” it should be doing them. If it ran Live Scans in addition to working with Hirease, it really would be best in class.

Are there other reasons Uber doesn’t do Live Scans?

I have a few theories:

  1. Price — Live Scans are more expensive than run-of-the-mill checks. This is the most unlikely answer given Uber’s war chest of venture capital, but it’s possible the company has future expenditure concerns in mind.
  2. Growth — Live Scans would slow down Uber’s scaling process, because every potential driver would have to get fingerprinted in person.
  3. Driver pool — Uber doesn’t want to run the risk of shrinking its potential driver pool by doing a more thorough background check.
  4. Legality — It’s possible Uber isn’t allowed to do Live Scans. Because such official searches access privileged criminal information, companies must apply to Live Scan their employees. If Uber has applied and been rejected, however, they haven’t told me.

Is there anything that makes Uber “safer than a taxi?”

Yes. Uber has stricter standards for its drivers than some taxi companies. For example, in San Francisco taxi drivers with a DUI on their records are still allowed to work, whereas Uber doesn’t accept anyone with a DUI.

Secondly, since Uber tracks its passenger and driver interactions, it has a history that can be useful in prosecuting assaults or other issues. Since taxis don’t have that digital footprint, if your driver attacks you, you won’t necessarily have the information to track them down.

The Uber driver in India who allegedly raped a passenger had a record. How does Uber do background checks abroad?

It varies from country to country. Every place has different laws for background check procedures and different ways of storing records. Live Scans only apply to the US Department of Justice and FBI systems. In the case of India, as some have pointed out, clean records are easy to forge. That makes doing comprehensive background checks challenging for any company, not just Uber.

What background checks do Lyft and Sidecar do?

Uber’s competitors also don’t do Live Scans. They work with different private agencies  similar to Hirease. But the DAs didn’t have a problem with Lyft because Lyft said it would change the description of its background checks. The DAs are still in legal negotiations with Sidecar over the issue.

Will Uber have to change its background checks now that it’s being sued?

Nope. The DAs are respecting the CPUC’s authority over this issue. But the DAs want Uber to stop marketing its driver vetting processes as the holy grail.

Perhaps down the line Uber will use some of its recently raised $1 billion war chest to make sure its background checks really are the best around.