Partnering in service businesses is now so widespread that it is almost taken for granted. Passengers travelling on United flights anywhere in the world are offered Starbucks gourmet coffee in a dual-branded cup. Baskin-Robbins ice-cream shares premises with Denny’s family restaurants. Mail-order merchant L.L. Bean provides Federal Express delivery to its customers. United Airlines and Lufthansa coordinate their airline schedules and frequent flyer programs and place their logos side by side in international advertising campaigns.

As many as half of alliances are failing to live up to expectations, delivering neither a competitive boost nor higher profits

In an expanding array of service businesses, managers are discovering that alliances can be an effective way to strengthen brands and improve economics. These alliances come in a smorgasbord of flavors: co-branding, co-marketing, code-sharing, licensing and distribution arrangements, strategic outsourcing, and more. Yet despite the attractiveness and popularity of partnering, our work with numerous service businesses suggests that as many as half of all these alliances are failing to live up to expectations, delivering neither a competitive boost nor higher profits. Partnering is turning out to be much more difficult than many companies anticipated.

An analogy can be drawn with the pitfalls and...