I was wondering the other day, that there surely has to be a way for Valve to come out on top in this gen. The more I thought about it, the more I realized that they could easily blow away the competition. Here's how-
Tidal wave of exclusives - Valve could launch Left for Dead 3, Half Life 3, Portal 3, Team Fortress 3, and Counter Strike 2 to compete with all the exclusives from Microsoft and Sony. These franchises are pretty much among the best in their respective categories, and would bring in lots of people. The problem is that their previous incarnations were on console. However, if Valve wanted to hurt Sony and Microsoft they could change that.
Cheap Steam Box - Valves direct answer to the consoles should be a very cheap box that is 150-200 dollars. I don't think they should abandon PC, because that's what makes them unique. The box should stream games from your PC and they would help each other run the game, meaning that you wouldn't have to have a really good PC to run the game. It would add the comfort of laying back in a couch as well, which many people want.
Advertise the amazing benefits more - Most people don't have a clue about the sales that Steam runs daily, or the fact that you don't pay any money for multiplayer. They also don't know about things like steam workshop, that allow modding dunces like myself to have fun. Spread the word and show people the tangible benefits available to them.