This report, produced jointly by the U.S. Chamber of Commerce, the Center for American Progress, and Frederick M. Hess of the American Enterprise Institute, is a call to action in response to how poorly states measured up on key indicators of educational innovation. The report is the first-ever attempt to evaluate the innovation gap in American education on a state-by-state basis and graded the states and the District of Columbia in eight categories: school management; finance; staffing: hiring and evaluation; data; technology; pipeline to postsecondary; and state reform environment. The initial intent was to evaluate the innovation gap in American education and identify key problem areas and seeking promising solutions. The results were deeply troubling. From weak data capacity to anachronistic finance systems, schools just do not have the ability to respond to 21st century educational challenges. Our nation has not done nearly enough to help. The data for this study data came from a wide variety of sources, from federal education databases to our own 50-state surveys. The findings and recommendations detailed herein cover everything from the need for more thoughtful use of technology to the overarching importance of giving educators flexibility in meeting shared student-achievement goals. Findings include: (1) Rigid education bureaucracies impede quality schooling; (2) State finance systems are opaque, inefficient, and undermine innovation; (3) The teacher pipeline fails to provide a diverse pool of high-quality educators; (4) Teacher evaluations are not based on performance; (5) Major barriers exist to the removal of poor-performing teachers; (6) The outcome of state technology spending is unknown; (7) State data systems provide limited information on school operations and outcomes; (8) Schools provide too little access to college-level coursework; (9) Only one state, Hawaii, has created a student-based funding system; (10) and (11) States lack a culture of education advocacy. Overall, the states posted mediocre results, and across the categories, not a single state earned top grades in more than one or two areas. Recommendations call for more flexibility, better accountability, more capacity, an end to monopolies, and a stronger reform environment. (Contains 59 endnotes.)