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Article Summary

Reinventing Government. Reading, MA: Addison-Wesley. Chapter Six, "The Customer Strategy: Putting the Customer in the Drivers Seat" pp. 157-202.

The Customer Strategy and Competitive Choice Model

In this chapter, Osborne and Plastrik outline the key elements of a successful customer strategy, drawing primarily from Minnesotas experience with open enrollment and structured school choice. The authors argue that an organization built strategically around accountability to customers leads to systematic improvements in quality, diversity and public responsiveness and can be applied as much in the delivery of public goods as private. Critical to Osborne and Plastriks competitive choice model is the need for carefully crafted protections for the public interest as market choice is introduced. Government does not abdicate its watchdog role to the "invisible hand"; nor are consumer preferences absolutely sovereign. "Competitive choice" demands that the government play an active role structuring the market, monitoring the outcomes, and remediating gaps in access, equity or erosion in the integrity of public goods.

The customer strategy starts with empowering service recipients to choose among competing service providers. Consumer demand can be effective only if two conditions are met. First, consumers need to have free access to information about choices and second, they need the buying power to create consequences for providers on the supply side. To meet the first condition, governments can measure the performance of service providers and make that information accessible to citizens by way of brokers. As for the second condition, dollars must follow consumers preferences. In Minnesota, tax dollars follow students to the public school districts where their parents choose to send them. Often, a government needs to provide vouchers to supplement incomes of those least prepared to "buy" according to their preferences. Citizens are given control of their own resources and can take them to competitive service providers, but public units do not become enterprises able to set their own prices.

Balancing Consumer Demand with A Concern for Equity

On the one hand, government has the obligation to ensure that effective demandthat consumers are able to demonstrate their preferences through their purchasing power. Government has an equal obligation to ensure that manifestations of consumer demand do not distort the civic nature of the public goods. For example, in Minnesota, the courts and the legislature have made explicit the requirement that school choice cannot lead to further segregation of the schools by race. Concretely, Minneapolis children of color can leave the school district for other districts, but this is not a prerogative open to the white students of Minneapolis. Similar principles underlie rules that prohibit "creaming" by public schools in an especially good competitive position and thus overenrolled. In such cases, government may require, as Minnesotas school system does, that all potential entrants be chosen by random lottery. In this way, public goods like education, health care, or social services retain their public character and do not become yet more aggravated expression of the inequalities in the economic marketplace.

Dual Accountability

Osborne and Plastrik justify such limits on consumer sovereignty on grounds of dual accountability. Public organizations are accountable not only to the primary customers, service recipients, but also to secondary customers, communities which share an interest in the enterprise the government is undertaking. In Minnesotas open enrollment program, school officials have a primary responsibility to respond to students and parents needs. In addition, they carry a secondary responsibility to the legislature, courts, and elected officials. Consumer sovereignty must defer to public policies established by democratically elected officials. As the authors put it: "Elected officials, who represent the citizens at large, set the overall rules of the service delivery system. Within those rules, providers should be accountable to customers and customers should be king. But customers must obey those rules" (198). 

Effective Supply

In addition to demand, there must be an effective supply for a customer strategy to work. Without a diversity of choices, the well-structured market is moot. Governments can often play a supportive role to encourage the development of service providers. First, governments may choose to participate financially by subsidizing startup costs of new service providers. In health care, this might mean subsidy of rural health care providers or scholarship moneys reserved for rural family practitioners. Second, a government can choose to authorize or license new service providers or make flexible historically rigid requirements. Minnesotas open enrollment program grew out of the post secondary program, which opened community colleges and universities to any high school students looking for a different type of education or challenge. Alternative programming and creation of charter schools exploded with legislation authorizing teachers to start their own schools to meet the needs of at-risk students and students with special interests.


Competitive choice, then, is often the best choice for goods that are at least partially public in nature, meaning that benefits accrue to more than the individual consumer. We all have a vested interest in ensuring high quality education, as we do in health care. To ensure equal access, the service can be delivered for free, consumers can receive vouchers or the price can be fixed so that the service is affordable. Public officials also have to intervene to prevent "creaming", deceptive marketing, and increased race or class segregation, using techniques outlined above. In this way, public officials bring market advantages to the consumer while the ugliest of market inequalities are not recreated in public good delivery.