They're pretty aware of this. But breaking a duopoly like this requires more than just a "great phone". Microsoft has had and does have "great phones", but without the app ecosystem to back them, it doesn't matter that the phones are great.
The Windows Phone might run faster, have a longer battery life, and just work better than the comparable Android flagship, but since you can get freaking Pokémon GO on the Android, people will buy the latter.
Microsoft is basically waiting for a chance at a paradigm shift in what it means to have a smartphone, so that they can release something you can get nowhere else. In the meantime, they're kinda just treading water and keeping their mobile OS workable and modern.
The Windows Phone might run faster, have a longer battery life, and just work better than the comparable Android flagship, but since you can get freaking Pokémon GO on the Android, people will buy the latter.
Microsoft is basically waiting for a chance at a paradigm shift in what it means to have a smartphone, so that they can release something you can get nowhere else. In the meantime, they're kinda just treading water and keeping their mobile OS workable and modern.