To some degree, yeah they did, by leaving space for a lean and mean competitor like Google Chrome to come around and eat their lunch. And when it was introduced, Google Chrome truly was the lean and mean browser, less bloated than both Firefox and IE.

But I'm not sure how much they could've done. Maybe they could've invested a ton of engineering resources into a project similar to Firefox Quantum earlier, so that Firefox didn't leave as much room for a leaner browser? But half the reason people complain about Firefox today is that they broke XUL extensions, which was an absolutely necessary step in making Firefox a competitive, fast browser. I can only imagine the backlash they would've seen if they did that before Chrome ate their lunch.

And I'm not sure how much it would've really helped, since 1) Chrome would've still been a less bloated browser simply through having been around for a shorter time and having fewer features, and 2) Google would've still had immense marketing opportunities by plastering Chrome ads all over Google Search etc.

Firefox was indeed blowing past all the other browsers and set to become the standard.

That's when Google realized they had to do something. The market could not be allowed to be dominated by a pro-freedom, pro-privacy product.