In many cases, new services are developed based on incremental innovation. Thus, how to identify functional characteristics and how to differentiate new service development are two critical questions. However, previous research has ignored the functional heterogeneity of service when using innovation tools for new service development. In response, we suggest a hybrid approach to differentiating the method of generating new service ideas. A Kano model is first employed to identify whether functional characteristics are core or peripheral, after which different methods are applied for each function. For core functions, a case‐based reasoning approach is used, which focuses on identifying similarity; for peripheral functions, we suggest instead a modified zigzagging approach to identify creative functions. To present the working of proposed approach, we conducted a case study using Appstore application, IreaditNow, and show how to generate alternatives for both core services and peripheral services.