Innovations are needed to improve water environment at lower costs. This paper discusses why water management sees few innovations, and how innovations can be fostered. The focus is on domestic water use in the Netherlands but answers to the questions have broader implications. By the term water chain we refer to operations in sourcing, preparation, distribution, and use of water (water supply), as well as wastewater discharge, collection, and treatment (sanitation). Innovations are interpreted in the Schumpeter (1939) sense of “doing things differently” [p. 59], implying the use of new technologies that may be tools, processes, products, services, and so on. Innovations can embrace both the supply side of new technologies (research and development - R&D, and demonstration) and the demand side (adoption and use of the new technologies through dissemination called diffusion). Institutional changes are not considered in this article.