Thinking in terms of what MS are going to compete with, given Kinect is dead, they have the options of:
1) Trying to revitalise Kinect
2) VR solution
3) Budget console
4) Hardcore console
5) 'New gen'
None are clearly the better options regards the current market, but I think powerful console is the best place to compete. However, with PS4 having an entrenched market lead, it'd be very OXB vs PS2 I think, even offering substantially better than PS4N. At which point they may just go with a lower cost, simpler upgrade plan, and start into the whole iterative console cycle full force, with a new machine every two years? Maybe try something radical like that, because the status quo for the console space is no longer stable.
Hmm, that's more business talk than next-gen hardware prediction...