Introduction

Digital platforms have been a disruptive force for the past couple of decades in a wide range of industries, such as transportation, hospitality, retail, and others.[1] These platforms such as Uber, Airbnb, Facebook, and Amazon.com have displaced a number of traditional product and service providers and fundamentally changed customer behaviors, to the extent that they use these platform names as verbs (Figure 1). Digital platforms have become a foundation for disruptive innovations in recent years, by proving new value-adding services for numerous customers and suppliers around the world.[2]

Figure 1. The rises in the use of platform names as verbs in 2015-2022[3]

This explosive growth in scale is driven by two- or multi-sided network effects, in which the number of participants on one side of a platform grows faster when there are more participants on the other side and vice versa.[4] For example, more customers would utilize the platform when there are more suppliers available to choose from, and likewise, more suppliers would join in the platform when there are a sufficiently large number of customers to serve. This dynamic creates a virtuous cycle that propels its skyrocketing growth. This is true both globally and in Korea.

Artificial intelligence (AI) is another disruptive advance in digital technologies. This has been enabled by an exponential growth in computing power and data, two key ingredients in AI development.[5] Now anyone, without necessarily strong technical capabilities, can train machines with a cornucopia of data, so that they can learn patterns from the data and discover patterns that humans might not be able to see.[6] Such machine-learning algorithms can predict outcomes from underlying input in a highly accurate fashion, automate tasks that humans have usually performed, and generate a variety of outputs, such as writing, images, or even videos, given inputs and prompts. This leads to a wide variety of innovations such as driverless vehicles, chatbots, and agentic AI.

This article explains how advances in AI can further accelerate innovations and growth over digital platforms. AI will not only dramatically amplify network effects between multiple sides but create a whole new virtuous cycle via accumulating platform data and reinforcement learning.

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• [1] Rietveld, J., Ploog, J. N., & Nieborg, D. B. (2020). Coevolution of platform dominance and governance strategies: Effects on complementor performance outcomes. Academy of Management Discoveries, 6(3), 488-513.
• [2] Cennamo, C., & Santaló, J. (2019). Generativity tension and value creation in platform ecosystems. Organization science, 30(3), 617-641.
• [3] Source: https://books.google.com/ngrams/graph?content=Ubered%2CFacetimed%2CVenmoed&year_start=2015&year_end=2022&corpus=en&smoothing=0&case_insensitive=false
• [4] Parker, G. G., & Van Alstyne, M. W. (2005). Two-sided network effects: A theory of information product design. Management science, 51(10), 1494-1504.
• [5] https://futuretech.mit.edu/news/what-drives-progress-in-ai-trends-in-compute
• [6] Choudhury, P., Allen, R. T., & Endres, M. G. (2021). Machine learning for pattern discovery in management research. Strategic Management Journal, 42(1), 30-57.