Service Design (SD) is a maturing design discipline that is used to support service innovation in organizations. However, organizations still struggle to embed SD capabilities in sustainable ways. This paper examines how small and medium-sized organizations (SMEs) can embed SD by cultivating SD skills and knowledge at management level. We report on a 3-year action research study situated in a medium sized non-design intensive organization. The study demonstrates it is essential to focus on management in order to cultivate a SD culture in this context. We find that SMEs must enable managers to ‘lead through design’ as an organizational condition for the development of a sustainable SD culture. Based on our findings, we propose a process model for building a SD leadership in SMEs and discuss three central tensions related to this process. Together, these provide both theoretical and practical insights for future work.