John Gruber over at Daring Fireball has a nice editorial on The Android Opportunity, and what Google can do to bring the Android brand up and over the top.
Start by copying what Apple has done right. Release one new phone per year, every year. Split that one phone into separate models by storage size, keeping all other specs the same. Apple has shown you can make a lot of money by charging an extra $100 for less than $100 worth of flash memory.
It's interesting if you think that 2 years ago the iPhone didn't even exist, hell, the market hardly existed before that. Yes, I know there were smart phones, but they didn't have the mindshare (IMHO) that Apple has created in that time. And then in that time it's become a juggernaut, had a falter from some of the bureaucracy / BS at Apple, and other phones are making a play for it's market share, all in that short time.