The problem with Mattrick wasn't Kinect, it was that Always On served Micrsofts needs and not the consumer in any way. IF MS wants to get back in the lead, they need to do the opposite. This is impossible knowing the indians working their, but lets dream.
The time of the living room PC is here. You don't need a mouse and a keyboard. Just tell AI and it will do it. A tablet that has on board AI, not on the cloud, and not sold to you. Just enough for system management and dictation. But it's always there. They could sell generative AI, but this is how they win the next paradigm shift.
Your tablet is your laptop, its your desktop, its your Xbox. It goes anywhere and, after an initial sync with tv's, just turns on when you enter different rooms at the house, office, etc. (TV input switching has become a cancer begging to be solved)
We don't need keyboard and mouse. We don't need controllers. They can be added wirelessy and will be used frequently, but the core system would just be a 10 inch tablet, with a small thin architect (from matrix) style wii'mote that slides into the back of the unit. Trigger, mouse, mic, and steampad style touch on the remote.
The world is ready for the living room PC. Will it be a phone, will it be a tablet, will it be a watch? It will have some predominantly pro-consumer element to it that totally changes how we interact with systems, similar to if not exactly like I mentioned above. And that is why it's not going to be Microsoft.