Current work on service systems is flourishing. Both researchers and practitioners seek to build service systems to create innovative services and increase productivity in the service sector. Unfortunately, most of the existing work focuses on information systems and their lack of models that not only represent entities in service systems with formal methods, but also illustrate a mechanism to achieve innovative services. In this paper, we firstly propose a general service system framework listing static components used in service production and discussing relationships between them. We then introduce a service model to represent pivotal components in service systems and also discuss how to innovate. Since competencies are important components in service systems, we define an ontological description of required competencies to carry out innovative services. We finally present a simple case study to further explain our formal model.