C# (Visual C# Interactive Compiler), 111 bytes

s=>{var t=s;do{s=t;t="";for(int i=0;i<s.Length;)t+=s[i]%48*(s[i++]!=(s+0)[i]?1:2*++i/i);}while(t!=s);return t;}

Try it online!

HUGE credit to @ASCIIOnly for golfing ~30 ;) At first we were both posting updates simultaneously, but at some point he clearly went to town!

-2 thanks to @EmbodimentOfIgnorance!

Less golfed code...

// s is the input as a string
s=>{
  // t is another string used
  // to hold intermediate results
  var t=s;
  // the algorithm repeatedly
  // processes s and saves the
  // result to t
  do{
    // copy the last result to s
    // and blank out t
    s=t;
    t="";
    // iterate over s
    for(int i=0;i<s.Length;)
      // append either 1 or 2 times
      // the current digit to t
      t+=s[i]%48*
        // compare the current digit
        // to the next digit. to prevent
        // an out-of-bounds exception,
        // append a 0 to s which either
        // gets ignored or collapses
        // to 0
        (s[i++]!=(s+0)[i]
          // if they are different, then
          // the multiplier is 1
          ?1
          // if they are the same, then
          // the multiplier is 2, and we
          // have to increment i
          :2*++i/i);
  }
  // continue this until the input
  // and output are the same
  while(t!=s);
  return t;
}