I think they should, and the reasons are twofold: for the industry/gaming at large and for Microsoft/Xbox.
Let's start with the industry view. Back in the 360/PS3-era MS and Sony started to entangle their respective hardware generations with each other, releasing close to each other and highlighting direct competition. This had a negative effect on the industry. As their direct competition meant that they were in dire need to directly one-up each other, they focused on measurable stuff: power, performance, graphix. This while disregarding the more unique aspects a console can have, the additional value for gamers. This lead to explosive growth of budgets since this era, as the focus was more and more at tech and power, which meant games had to utilize this. Since then we barely have seen exploration of new genres, or even old genres that fell out of mainstream (a space indies started to fill). We see the same genres - shooters, action, action-adventures, 3D action RPGs, racers - over and over with only advancing graphics and effects. I miss the innovation in new ideas that were present before. Again, the indies are here for the rescue.
So disentangle the hardware gens on the side of Xbox and PS might help to cut the gordic knot. If their respective consoles have years on each other, it will be quite easy to have more power, without pushing it to the extreme. Instead they could focus on features that make their platform stand out more. If we dial down the speed of technological advancement, game devs get space to breathe and control their at this point unsustainable budgets. It looks like development of an AAA game is by now needing six or more years. This is crazy. We need a full generation to get the games for it. There is a need for companies to get to more palatable two year development cycles.
And for MS? Well, simply put Xbox is losing at the moment against PS. That is not even down to the hardware - which is completely fine, Xbox Series is a good device. It is down to the brand power of PS, which is based in the unspoken promise of PS getting the 3rd-party games. We saw now with PS4 and PS5 that it can sell on remasters and some weak early entries on this promise alone. And the promise is fulfilled eventually, as the sales of the platform lead to the 3rd-parties releasing their games there. This brand power was built over decades. Nothing MS can do to build the same in the next 5-10 years. So they need to focus on what makes their platform special. Something that is much easier, if it gets it's own spotlight without being compared to the system of the competitor.
