Service providers are increasingly depending and using digital infrastructure and tools provided by digital platforms to transform their services and develop digital ones that meet the needs of heterogeneous end users. However, while there is an emerging literature of developing digital services, little is known about the dynamics of transformation. Using multiple cases of firms that develop digital services, the digital service taxonomy was synthesized to understand the dynamics of transformation in developing digital services. This study identifies five main dynamics: the services experience, the service process, the service capabilities, the service environment and the service delivery.  Each of those dynamics and their associated factors are explored under the objectives of business, interaction and technology. This enables us to extend the existing literature on digital service development in particular and contributes to the research of digital innovation in general. © 2019, Springer Nature Switzerland AG.