Innovation is increasingly treated as a strategic necessity in turbulent environments; however, many organizations struggle to convert innovation intentions into executed outcomes because their readiness and conversion mechanisms are weak. This challenge is especially salient in regulated service sectors, such as banking, where innovation must be institutionalized without compromising operational discipline. Drawing on capability and readiness reasoning, this study examines how innovation-related capabilities translate into ISO 56001 adoption as an innovation management system, with organizational readiness to change (ORC) specified as a mediating mechanism in Saudi banks. Using a quantitative cross-sectional survey of managers and employees in Jeddah-based banks (N = 139) and PLS-SEM with bootstrapping (5,000 subsamples), the findings show that innovation process capability, innovation performance management capability, and innovation strategy capability each strengthen ORC, and ORC, in turn, increases ISO 56001 adoption, while all three capabilities also retain significant direct effects, indicating partial mediation. The model explains substantial variance in adoption (R² = 0.714) and readiness (R² = 0.650), with an acceptable fit (SRMR = 0.060). Banks should pair capability development with deliberate readiness-building to strengthen substantive adoption. Future research should longitudinally test this pathway across regulated service contexts