How digital platforms respond to regulation

Regulatory changes may pose headwinds to platform business models. How do we address such headwinds?

This article is part of the Digital Platforms hub

Firms today execute platform strategy in an ever- changing regulatory environment. On one hand, centuries-old regulation written for industrial-era competition is increasingly being rewritten. On the other hand, many platform firms have operated in a regulatory
Wild West over the course of the first two decades of the twentieth century. As regulators catch up, these firms have to revisit their business model assumptions to retain their competitive advantage in the face of regulatory headwinds.

Consider, for example, the increasing regulation around data privacy. Between 2005 and 2015, most platforms harvested and exploited user data, operating in a regulatory lacuna. As privacy regulations like the GDPR (General Data Protection Regulation) in the European Union gain greater ground, companies whose business models relied heavily on unrestricted access to user data need to revisit and reshape their business models.

In general, the GDPR places a growing compliance burden on firms which capture and leverage user data. These businesses, in turn, need to restructure their machine learning and AI efforts to ensure their platform efforts comply with changing regulation.