In short: Yes, design sprints are effective for Service Design projects, in fact I've used them only for Service Design work.

My Personal Experience

All the Design Sprint projects I've done so far have focused more on services than products. From my experience, Design Sprints work really well for ideas rooted in the service world.

The beauty of a design sprint is that it's an innovation process. It helps you innovate almost anything. So, it naturally fits well with services.