In order to respond to the challenges posed by digitalisation, new competence and operating models are required in working life. This, on the other hand, requires developing the content and methods of higher education. This paper describes an experiment that addresses developing higher education in service design studies at Laurea University of Applied Sciences. The pedagogical starting point for the development work was a pedagogical model, Learning by Developing (LbD), that is based on learning through research and developing (R&D). Expertise and experiences are shared between teachers and students as well as other project partners. While working in the project teams, students take part as equal partners bringing their expertise with them. The teacher members of the project team take part by providing their expertise to steer the progress of the work and, at the same time, the progress of learning. The objectives of the development work were: (1) to gain a research-oriented, developmental and problem-based higher education approach to studying; (2) to produce new methods and techniques to involve multidisciplinary students, citizens, companies, and the public and third sectors in the development of digital services; (3) to provide students with competence to use diverse development methods and tools flexible at all stages of the service design process; and (4) to provide students with competence to gather, structure and apply information in genuine R&D contexts. The development work focused not only on the pedagogical issues, but also on student and stakeholder participation in the innovation process, and on applying and developing appropriate service design tools and techniques for that purpose. The development work was conducted during the multidisciplinary master's degree service design studies in the project called WeLive. The WeLive project was devised to transform the current e-Government approach by facilitating a more open model of design, production and delivery of public services leveraging on the collaboration between public sector, citizens and entrepreneurs. WeLive applies the service design approach to deliver next generation personalised digital services to citizens. For that, it contributes with the WeLive platform, an ICT infrastructure where stakeholders collaborate in the ideation, creation, funding and deployment of new digital services. The outcomes of the development work were (1) a new teaching model in line with the service design process, with the aim of providing students with the ability to act as service designers and innovation processes developers, and (2) an open innovation process model to involve multidisciplinary students, citizens, companies, and the public and third sectors in the development of digital services.