the problem for Boeing was that Bombardier was launching the C-Series. Airbus recognized both a threat and an opportunity and launched the Neo at very low R&D cost. AA among others wanted that.

Boeing faced a difficult conundrum. Do they develop a clean-sheet design that would be more efficient and would leapfrog the Neo but take 4-5 years longer to design, thereby leaving the NG (Boeing’s bread and butter) severely exposed to an aircraft with far better economics or do they simply follow Airbus with an expectation of retaining same market share split.

Boeing has a very conservative corporate culture that focuses on returning cash to shareholders. The low-risk choice was to follow what Airbus was doing. A clean sheet design not only left them vulnerable for too long but would likely use the same generation of engines as the Neo, so would only be marginally more efficient unless Boeing were to go to composites, which it has never done at that kind of volume. A new composite plane would be more efficient but also far more expensive to build and amortize the development costs. I think Boeing was having a hard time making the numbers work.

What they missed (besides the MCAS problems) was the move by the market to larger narrow bodies, where the A321 has a significant advantage over the original MAX-9 and the -10.

No argument there. But to add, they waited too long, first about starting a clean sheet design, which they could have done in a timely manner but would have dented the 737 line. Then when they followed the AB lead, while the neo is a relatively easy and straightforward extension to the 320 line, the 737 had already been pushed way beyond what the aging design was worth. So they promised asuming they could deliver. Turned out the wishful thinking did not work.

Not sure that is directly related to the issue at hand though. Airbus probably was every bit as surprised albeit pleasantly one would think. But also, in the fight between Airbus and Boeing, it's starting to look like Airbus won the prize by having been able to acquire the CSeries program, which is starting to look like it will be the killer of the older relatively short single aisle models. Because it's a fresh clean sheet model, and perhaps because it's 3-2 vs. 3-3. However, coming back to Boeing, the A321XLR is more significant in relation to the MMA plan. Which it may well kill, because it's starting to look like the XLR may well be nearly ideal for around half the potential MMA market. With the other half not large enough to justify the upfront cost of a clean sheet design. So the "conservativeness" and short term perspective of the bean counters is starting to hit the Boeing bread and butter pretty bad. Precisely what the doctor ordered for the bean counters I guess. :-)