Terms such as innovation, digital technology, knowledge society, service innovation are increasingly mentioned in the context of public sector business. The purpose of this study is to encourage people, either as employees within the public sector, or as users of public sector services, to embrace the social changes brought by the technological progress, in order to jointly create a more transparent, efficient and competitive society. In this paper I have sought to evaluate the concept of social innovation as the potential for transforming the public sector into a more efficient service in providing services to its citizens. A key implementing factor for change within the public sector encompasses well-formulated public policies, which throughout cross-sectoral cooperation (i.e. the involvement of all stakeholders, especially those from civil society), create new social value, the common good, which is the main task of the public sector. Public policies, placed into European and national context have been detailed through strategic documents that address innovation, with an emphasis on social innovation. An entire chapter deals with social innovation, the ecosystem of social innovation as well as the stages of social innovation, both in the European and national context. The penultimate chapter is focused on the national public sector in correlation with social innovations, citing a number of successful examples in which Croatia leads in Europe, such as the Central State Portal, i.e. the E-citizen system. Emphasis was also placed on public administration as the key in the transformation of business and implementation of e-services within the system itself. The paper ends by citing innovative examples of public administration of the City of Zagreb, oriented towards social innovations, which create new value, general benefit and self-sustainability. The aim of this study was to raise awareness of the fact that Croatia has the potential to create a modern society capable of accepting and adapting to technological progress and creating an innovation culture based on a knowledge society.