This article examines the factors affecting the innovativeness of service encounters – either as drivers or as barriers. The assumption is that a considerable number of innovations in service industries are initiated in service encounters and that employees are the core factor in connecting customers with the innovating organization. Based on literature studies and pilot case studies, seven propositions are proposed and tested in a qualitative, hermeneutic way in field experiments in nine service organizations. Important new results are that encounter-based innovation requires mutual empathy between employees and customers, employees investing stubbornness and time can be a driver for innovation, and several layers of management can be a barrier. In the field experiments three new factors for encounter-based innovation were found: translation, multitasking, and hyper-professionalism. The two first are drivers; the third a barrier. A model that summarizes the findings is presented.