The medical, healthcare and care-giving services are of great concern in aging societies. This study proposes mechanisms for developing innovative information technology-enabled (IT-enabled) services. The Taiwanese government has adopted these mechanisms for stimulating service innovation in the healthcare industry. Action research is conducted to explore how the Taiwanese government learned from a hospital project and applied this experience to develop innovative IT-enabled services in the healthcare industry. This study also identifies issues that arise when innovative IT-enabled hospital services are implemented and viable solutions are offered to effectively address those issues. Useful lessons were learned from the key mechanisms employed by the Taiwanese government to promote service innovation. This study elucidates the mechanisms of innovative service development, ultimately increasing the knowledge of service innovation.