Capability Development: Commercial BanksAbstract The competitive strategies of Thai banks during the transformative period brought some successes and some failures associated with payment systems. In this chapter we show how banks, ranked among the largest in the world, devised and pursued innovation strategies. This allows us to contrast the competitive strategies of first movers, dominant market players, re-engineering leaders, and innovative state banks. The cases illustrate the relationship between innovation and banking leadership in the country. In the final section we assess the common characteristics of these approaches and present some lessons that can be applied by other commercial banks seeking to use IT to gain competitive advantage.Siam Commercial BankSiam Commercial Bank was officially established in 1906, following its transformation from a Book Club set-up in 1904. The Book Club, which was a private trust, formed the modern basis of the bank, providing basic banking functions such as deposits, loan extensions, and foreign exchange. It was operated by local people and primarily served Thai and Chinese clients in the local business community. The bank became the first Thai commercial bank formed after the first foreign bank, Hong Kong Shanghai Banking Corporation, began operations in the country in 1888. Most importantly, it has served as a model for many Thai commercial banks in the early and modern periods. In 1996, the bank was ranked the fourth largest Thai commercial bank in terms of total assets, and the 211th largestRole of ITSiam Commercial Bank has been progressive in the use of IT through senior-level management support which has helped shape its visions and strategies. For example, the active involvement of the chief executive officer has led to investments in data warehousing technology to learn more about the bank and, more importantly, customer information (The Asian Banker 1997b). Furthermore, the chief executive officer has clearly defined two main objectives in the use of IT: (1) to facilitate daily banking activities between the bank and customers, and (2) to develop new methods in delivering financial services (SCB Technologies 1996a).More interestingly, the bank surprised the banking community in early-1998 by announcing an increased investment in its IT budget by 23% over its 900 million baht investment in the previous year (Bangkok Post 1998b). This was despite the countrys financial crisis which caused a change in the exchange rate regime, the devaluation of the local currency, and the cutting of costs across companies. In response to the financial crisis, the bank established a non-profit organisation to serve as a job placement centre for potential employers and employees, while also providing language and computer training for unemployed IT professionals (Bangkok Post 1997n).Bank functions related to IT are mainly organised in the technology group. In addition, the information system audit department located within the human resource and control group also has a technological role. The technology group, following the initiation of ideas in the early-1980s and a reorganisation in 1996, reports directly to the banks chief executive officer, and is divided into five main units (SCB Technologies 1996b). Firstly, the technology policy division overlooks broad technological developments and provides a centre of co-ordination. It prepares and monitors policies, plans, and the banks expenditures in IT. Secondly, the system engineering department develops, implements, tests, operates, and maintains the banks computer systems. Thirdly, the technology and process engineering department overlooks the management of the banks two main computer centre, controls the operating systems, and manages the banks data warehouse located in mainframe computers. It also overlooks the purchase of computer equipment. Fourthly, the business relations department manages the banks call centre, promotes the use of IT in the bank and to the public, and finally, overlooks the banks customer information facility system, credit monitoring, and collection system, and black list system. And lastly, the applied technology department conducts research into the use of new information technologies, maintains computer software, and manages computer hardware, software, and communication standards. This last function has played a particularly important role in building and strengthening bank capabilities and is discussed later.Bank Automation and InnovationComputers were first introduced in 1975. This mainly supported deposit functions located at the banks head office. Early use of IT was extended to more sophisticated bank operations, and financial products and services. The pioneering ATM provided a new method of delivering payment services and was widely adopted by other local commercial banks which diffused nation-wide accordingly. In the 1990s, the bank once again became a