I think that the failure of Sega was only a matter of timing. I agree with Bret. Sega did create plenty of things which were ahead of their time.
Back in the 80s, early 90s, home video games were considered exclusively an entertainment for kids. Nintendo understood it, and provided exclusively games targeting kids, and young teens. Sweet, and colorful games. I feel like games you could find on the MasterSystem and then the Genesis were targeting a more mature audience. When you think about it NOWADAYS, this is great, and I still enjoy playing these games, but clearly, the Western countries were not ready for this move forward.
Now, I don't think this was a mistake; I think it was a strategy from Sega to try to differentiate with Nintendo, and attract adults to the video games. In a way it was successful; but, the first to have profited from this move was Sony in the second half of the 90s! And not Sega.
All this also reminds me of the Atari Jaguar and in a slightly different way the 3DO.
The Jaguar from Atari was an amazing console. Everybody who has known this period remembers the amazing Alien vs Predator game, which was the flagship game of the console. We were in 1993 or 1994, I don't remember. That was totally amazing. But, clearly, it was for adults, and as I mentioned, video games were reserved to kids only.
Today, the state of mind has totally changed, but it's also because adults of today, are the kids of yesterday.