Speaking today at the Project Management Exp 2016, former Xbox director Robbie Bach shared some inside stories about the early days of what is now a juggernaut gaming brand. During his keynote address and an ensuing Q&A session, Bach, one of the key people involved in the creation of the Xbox at Microsoft, talked about how critical Xbox Live was to the overall Xbox ecosystem.

“When Xbox launched, one of the things we bet on was online gaming,” he said. “That doesn’t sound very innovative today, but in 2002, it was very innovative. That business decision changed Xbox.”

Bach went on to say that the combination of Xbox Live and the launch of Halo: Combat Evolved was the reason the original Xbox “survived.” Earlier during his speech, Bach mentioned how the original Xbox was a huge money-loser to the tune of $5 billion. It was a loss that Microsoft could afford to take because of its successes in other markets, including Windows, he said.

“Now, the rest of the industry has copied and emulated to dramatic effect and has really changed the way people think about video games,” he said about Xbox Live. “You had voice with every customer; you could find your friends easily on the service. This was social networking before MySpace and before Facebook.”

Also during the speech, Bach talked about how the Kinect motion- and voice-sensing camera was not part of Microsoft’s original vision for the Xbox 360.

“That was not in the original 3P Framework,” Bach said, referring to his own method of problem-solving and management known as the 3P Framework that involves focusing on a small handful of items.

Microsoft created Kinect, then, partially in response to Nintendo’s runaway success with the motion-based Wii console.

“[Kinect] was never contemplated in the original 3P Framework. But as the market developed; Nintendo did some things–something called the Wii and the Wiimote,” he said. “There were some things we were seeing in our demographics where we weren’t reaching a broad-enough audience. Kinect became a new priority and we dropped something else off the list.”

Bach did not say what Kinect replaced on the Xbox 360’s roadmap or if it was added down the line. Whatever the case, he said the decision to create Kinect on the fly speaks to Microsoft’s ability to be flexible, something he said is critical.

Many have called out the shortcomings of Kinect, as it does not offer a true 1:1 experience. Bach alluded to the fact that Kinect is not perfect, saying it’s a “transitional” technology.

“It’s kind of halfway to an interactive room,” he said, saying the next step is AR technology like HoloLens or VR devices like Oculus Rift. “Those are going to take what Kinect is to the next level.”

He added that AR and VR technology will have gaming applications, but you’ll see devices like HoloLens and Rift used more in other, non-gaming fields.

Microsoft launched a new and improved version of Kinect for the Xbox One, at one time saying it was one in the same with the system. However, not even a year after the Xbox One launch, Microsoft released a lower-priced, Kinect-less bundle. Today, Kinect is not a big part of the overall Xbox One messaging, though Microsoft assures it has not sent the device to an early grave.

Bach shared a number of other stories during his talk, many of which are also documented in his new book, “Xbox Revisited.” He mentioned how not everyone was on board with the idea for Xbox to begin with, saying some wanted to “kill” it and that Microsoft should instead focus on Windows and other enterprise endeavors.

Bach also shared a story of a tense, three-hour meeting he had with former Microsoft executives Bill Gates and Steve Ballmer about the Xbox, during which they shared their concerns about the device. After hearing what Bach had to say, Gates and Ballmer eventually came around, and, with their support, people inside Microsoft who questioned the viability of Xbox ended up championing the device. This meeting was referred to as the “Valentine’s Day Massacre” since it was held on Valentine’s Day.

After 22 years, Bach left Microsoft in 2010. He now appears at speaking engagements and advises companies and government agencies about strategy.