I guess, in retrospect, Microsoft's fundamental synergy was "developers, developers, developers!" And realizing trading more powerful commodity PC hardware for decreased programming difficulty was a good deal. There were a large number of developers, or future developers, dissatisfied with catering to {insert Nintendo or Sony weird architecture hoops du jour}.
I'm not trying to argue about the specifics about what happened, but just in general terms, there was always going to be room for a competitor in a space that big, that was changing that rapidly. Imho.
I'm more flummoxed by the fact that a fundamentally social-native offering didn't disrupt the existing ecosystem, in the 2000 timeframe.
We had chat. We had basic web. Keyboards weren't that expensive, were they? Seems a killer feature for kids.
Not straight "the Web on your console", but something more like AOL, Prodigy, and the late 90s portals.
My only explanation is that the 3 big platform companies were still thinking in packaged software/games, sold retail, terms. Hence XBox Live, when it emerged, was essentially a way to get more value (multiplayer) out of the packaged software you bought.
And, to the GP point of crediting Spencer, there weren't even many synergies to exploit with a Microsoft console in the first XBox generation. It certainly didn't "integrate" with Windows in any way that made you more likely to buy it over alternative consoles.
AFAICT (as someone who doesn't spend much time console gaming now), its success was essentially built on the back of (1) access to capital, (2) savvy exclusives, (3) intelligent acquisitions, (4) avoiding missteps in hardware refreshes, and in later generations (5) strength of social platform. So, props where props are due, because 4/5 of those are skill. Especially while no doubt having to fight an internal battle against all the other Microsoft political power centers.