Given the lack of service-specific studies of organizational capabilities and competitive advantage, and coupled with the issues of conceptualizing service and operationalizing service innovation, this study takes an exploratory approach and examines how service firms themselves think of their service offerings and the capabilities underlying their design and service provision. As such, I aimed at understanding the distinctiveness of service capabilities related to the design of (and in) service. My research focus was primarily on knowledge-intensive services because of their unique position in value constellations and innovation in general. This exploratory enquiry draws on data from thirty-five interviews of service firms that are analyzed and told as three interrelated “stories” centered around the conceptualization of service, service capabilities, and service design (as seen by the interviewed service firms). The concept of service was expanded upon by identifying its constituting service elements (its building blocks) and the overarching service capabilities that are related to- and help instantiate them. In addition, by adopting a capabilities perspective, I introduce and develop the concept of service design capability (SDC). Service design, rooted in the capabilities view of service and at the most abstract level, helps firms identify “what they can do” for their clients. Therefore, I characterize service as the act rendered by the capabilities set to be part of the provider-client relationship. I further describe service design as the process of making the service tangible by translating organizational capabilities that underlie the instantiation of service elements (and their configuration) into- and according to the client’s context. Consequently, SDC represents the overall organizational capacity for service design (the process of creating a service). SDC was conceptualized as affording the translation of organizational capabilities by embedding them into a service relationship and rendering them tangible for the client. Using SDC as a research vehicle in studying the competitive advantage of service firms, I hint towards a service-based view of the firm by focusing on “service as capabilities in-use.” This study, and in particular the conceptualization of SDC, contribute to both research and practice by bringing conceptual clarity and increasing our understanding of service design.