In this article, we study the design and innovation of smarter service systems considering the deep integration of real service systems and virtual service elements. Specifically, we consider the perspective of life-cycle service system design and innovation that must consider the “social space” factors, such as stakeholders’ behaviors, which increases the complexity of service cyber–physical–social systems (CPSSs). We propose a new methodology framework, the semiparallel service system (SPSS) framework, following the CPSS architecture and artificial societies, computational experiments, and parallel execution (ACP) methodologies emerging in complex system modeling. We design two decomposition-then-aggregation loops to reduce the complexity of service systems innovation. In the first loop, we expand the Vee model of systems engineering to the N model to show how to develop an innovative service system step by step. In the second loop, the SPSS, in which the hybrid service system is parallel with the real service system, maintains the continuous innovations of the system. Following our framework, we can design prototypes, perform experiments, and run the hybrid service system. We use two cases, an Internet hospital platform design and a new service design in a customs bonded warehouse, to demonstrate the advantages and potential of our proposed methodology. Finally, we discuss the future research challenges and directions.