As a Microsoft FTE, I can see it this way.
The platform will stick around for now, is there plans for Windows Mobile? I would say yes. But the focus and dedication here is shifting.
I am not sure and I am not speaking on behalf of MS here, in all cases, the focus will not be to compete against iOS and Android, as these are in a different league altogether from consumers perspective.
I said that many times and will still saying it, what is killing the platform is APPS. Yes, consumers want to have Snapchat, usable Instagram and Facebook, Twitter with full feature-set. I know someone will argue that by saying "There are third-party apps out there can do the job", true in many cases, but average consumer looks for the apps by name, not by function. It is the reality, a teenager want to Snapchat after all! They want to play Angry Birds Transformers!!
The apps gap has been addressed entirely wrong, the universal apps proven to be a good strategy, but it is lacking the foundation of covering the basic ground of apps.
I have never came across a user who tried the platform and decided not to adopt it, gave me any reason apart from "This App is not there, this app is sucks, this app doesn't work like it works on iPhone"
In fact, I knew some users who decided to switch from Android to iPhone just because Snapchat is working better on iPhone!! See!! These little "might be stupid" details make the difference, but they are valid. Customers say what they want and what they like.
I would say, the platform focus will be the Enterprise now, and we saw some moves like the HP Elite X3, which is a good device, but it is not for consumers, HP building it is a proof with it's feature set that suites Enterprise and loyal audience only. Even with the rumored Surface Phone, which in my understanding might never see the light.
The mistake made was the release of Lumia 950 and 950 XL. Premium price for a clucky and cheap feeling handsets, they are running half-backed OS at the release time, on top of that, the Apps Gaps. That was a magical disaster recipe for failure.
Windows 10 Mobile is here to live, till when, who knows, but I am not expecting any dramatic change any time soon.
As long as Microsoft keeps focusing like it has been on creatives, businessfolk and gamers they can carve out a market in any computing area. For those people the issue isn't so much apps, as high quality, desktop grade software. Power you don't get on the other platforms as much. You bring those people over, the apps will follow.
I'd do it this way -
1) create a deal to bring 10 major third party pieces of win32 software, fully scalable and touch friendly, and into the windows store, at the time of the win10 on ARM release.
2) Add a virtual touch xbox game controller (Which would draw pocker gamers pretty hard), to draw in the massive back catalogue of games that can run fine on phones and tablets but are simply missing the controls. There are already people working on these, you could buy one out, and job would be 70-90% done.
My list would be something like this:
Fruity Loops (already scales for tablet, lots of people use this)
Adobe Illustrator (sketching on a phone with a stylus is a perfect example of the use of power on a smaller FF)
Adobe premiere effects? (I know people do make youtube videos while travelling quite a bit)
Firefox or Opera, full desktop (partly for the chrome extensions, which help fill the app gap. Doubt google would do it though)
Oracle Database?
Slack
Some form of coding editor
Some kind of small business accounting software
Perhaps one or two more core enterprise applications. Not my speciality
And a few games - Trine 2, is already touch, would just need scaling.
If you had the xbox virtual controller, you could have a few classics, like half-life 2, or any Microsoft licensed games they thought would make a nice demo of the platform. You'd want maybe 3-4 of these on release to say "this is the real mobile phone gaming experience".
If they could simply show windows 10 on arm, running on a phone, capable of more software depth and power, even ordinary people sitting on the bus might think...why can't I play that? Why can't my phone do those things?
And dedicated professionals and creatives will see the workflow benefit of continuum, being able to continue to work and be inspired away from the desk.
I also know gigging musicians are often looking for smaller FF's to take on the road.
For these crowds, yes, snapchat might be useful. But its not their be all and end all, and they are perfectly capable of going third party.
Trying to play apple at the iPhone game makes no sense. That's not even how apple got there. Follow the history - they carved a creative niche in desktop. Marketed themselves as innovators, and used "values branding", THEN they created the iPhone which sold like hotcakes even though it had no app store. Then we worked up to where we are today.
MS currently has some of that same "air of cool". Some people are saying "is MS the new apple?". The surface line is popular with the same age of young early adopters that took up smartphones. All they really need to do is extend that with innovation - and back up their vision with some money to encourage investment.
Not "me too" economics. There's no room for a third type of iPhone clone. What they want is a phone that does more, and appeals more to another group of people. If they can find that, makes something 'that does more", the other apps will come. As will "the cool".
And then, when flexible graphene OLED inevitably comes (and also voice activated smaller FFs), with some hopefully larger tablet marketshare, and a broad selection of more complex, powerful software - they will be perfectly positioned for the larger screen real estate, as well as via Cortana + bots, smaller FFs like watches, jewelry and scrolling phones.
There's not really a world in which apps, as currently formulated are "the future", so much as a player amongst many. They are too simple and feature poor for larger screens, incapable of any real fuinctionality with no screen.