Between March 1998 and September 1999, Sega did not make new consoles for the Western market. This doesn't apply to Japan, as the Saturn lasted throughout that period (and the Dreamcast was available for much of it). I feel that having that gap was horrible for Sega, even as bad as the Saturn did in the West. I have an idea as to how that gap could have been plugged, mostly with the Dreamcast. It wouldn't have won Sega the console war and they may very well have exited the console race in 2001, or sometime between then and the present, but it probably would have helped to some extent.

In hindsight, it seems that Sega should have had the Dreamcast available in the West for the holiday 1998 season, focusing on getting games ready for the Western market for that period instead of the Japanese market. Ideally, the system could have been released in both Western and Japanese regions in November 1998, but it may have been necessary to delay the Japanese release into 1999 - preferably, still before the PS2's March 1st announcement. This would have, obviously, ran counter to what the Japanese side of Sega wanted but would have been a visionary move, seeing the much larger Western market as a higher priority than the Japanese market.

Sega would not have missed a crucial holiday season, having something truly next-gen on sale against the PS1 and N64. It probably wouldn't have gotten a majority of the market share that season or been a PS2-beater but it would have at least given Sega time to compete while the PS2 was still unannounced.

On another note, getting the Saturn out in the West in '94 (and eschewing the 32X entirely) probably would have helped matters as well.