I used think about this kind of scenario all the time. However… in recent years I‘ve been thinking if Sega were sensible and fiscally responsible would they still be Sega? Not really. They’d just be Nintendo.
The best we could hope for is they'd have limped to the PS3/Xbox360/Wii era and come a distant 4th by not doing anything prohibitively stupid. Sega heyday ultimately fueled by a Japanese bubble economy so let's also have them genetically engineer an army of promiscuous yakuza super soldiers to keep birth rates up and ensure tiny plots of land are always worth more than their American equivalent thereby averting a banking crisis.
The way they'd have accomplished this without being hopelessly dull and not overstretching their in house dev teams is perhaps launching a Gamegear that wasn't derived from Master System hardware that had better battery life and a less horrendous screen. Essentially a GBA color before the GBA color.
Launch the Mega CD ever so slightly later with a less compromised color palette so the FMV looked good. It'll still be sort of stupid and overpriced.
Axe the Nomad, 32X, Pico and Sega Saturn.
Use the N64 hardware they were offered before Nintendo and use a 4xCD drive instead of carts. Launch slightly after the PSOne. Maybe put a tiny bit more memory in as well. Get western company to develop libraries for western markets ahead of time so the devs know what they're doing.
Double down on Europe with timely launches and buy up Psygnosis. Get EA Sports on board. Do everything in your power to get Squaresoft on board. Buy up some studios to port every hit you have to PC. Get ready to launch a Steam equivalent in the year 2000.
Rather than go balls out in arcades with Model 2 and 3 hardware that's prohibitively expensive focus on revenue sharing with operators and giving them a generic JAMMA sitdown driving game cabinet, and Net City type driving/shooting/regular upright. Make it stupidly easy to upgrade and make the upgrades really affordable so operators want to upgrade instead of leaving their badly maintained Sega Rally and Daytona USA cabinets on site for the next 20 years.
Convince Yu Suzuki he should keep making arcade games and not an RPG. Clone Nagoshi and deploy teams of them tune all the other major releases. Pay them frequent bonuses denominated in whiskey and Prada menswear.
Let Yuji Naka get hired by Sony with a generous stock option package.
Launch something like the Dreamcast but a bit more powerful, with a good pipeline for porting all your hopefully more broadly successful arcade games of the last few years over to. Do it same day with the PS2 and it'd compare favourably with the jaggies. Leak stories to the press about how Saddam Hussain has nuclear capability he planned to launch using linked PS2's till he switched to using Dreamcasts cos they're more powerful.
Ultimately all this will be for naught because blue skies, smart concise arcade gameplay and core Sega design styles will go out of vogue in the 00's as desaturated budget cola bloat takes over on the Sony/360 side and Nintendo mops up all the more casual audience.