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The structural and technological change in the UK financial services sector is creating a need for a strategic approach to IT‐based innovation. The conventional model of innovation, with its emphasis on the sequential development of discrete inventions or product ideas, appears to be an inadequate analysis of strategic innovations in this sector. A case study of the Bank of Scotland's management of IT indicates that the development of specialist, technical forms of expertise may pose a particular problem for the management of innovation—leading to narrowly bounded decision‐making perspectives which neglect the strategic and competitive dimensions of IT. Positive leadership and structural change proved to be pre‐conditions for the recognition and implementation of the strategic opportunities created by IT.
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