1. The screwed up producing the Sega Saturn and the 32x at the same time. Serious lack of communication and cooperation here
"Joe Miller (head of Project Mars, from SoA) decided that no one would actually want a simply upgraded Genesis, and ordered that the 32x be built as an add-on instead. By the time Miller realized he was wrong, and build a few prototypes of Project Neptune, a combo Genesis and 32x, the Saturn was already shipping. Project Mars and Project Neptune were complete and utter failures: Project Saturn crushed them."
2. They alienated retailers by allowing an early launch of the Sega Saturn at some retailers.
"In addition, the retailers who were not included in the early launch (most notably Wal-Mart and KB Toys) felt betrayed, with some retaliating by supporting Sega's rivals. This resulted in Sega having difficulties with these distributors for the Saturn (and also for its successor, the Dreamcast). For example, Sega's actions angered KB Toys so much that they refused to release the Saturn at all, and actually went as far as having some of their retailers remove anything Sega-related in their stores to provide more retail space for the Saturn's competition instead."
There is a lot more to the story then the Saturn being complicated to program for. Sega hosed themselves. Oh yeah and this:
"Sony gave the Software Development Kit (SDK) to all third party developers, but Sega only used it internally withholding it from all outsiders...
"But that isn’t what put the final nail in Saturn’s coffin: The then CEO of Sega of America decided to not support the Saturn, and refuse to port games here. I mean, not just unpopular ones, but any. This violated Sega’s promise to the few fans who were left that they’d bring many games here to America."