Innovation in services is one of the prime drivers of several economies. There are various schools of thought that have emerged over the past few decades in this area. The present paper focuses on the evolution of the "synthesis" school of thought. It contributes to literature by extending the framework proposed by Lancaster ("The Journal of Political Economy", "74"(2), 132-157, 1966) and other researchers by incorporating aspects of Web 2.0 technology with a specific reference to e-learning. The proposed framework is validated using case study from the field of e-learning.