What did the manufacturers expect?
Google want Android to be a uniform experience, where the controls for all phones are in the same place, your applications work on any Android device, and your device will be up to date and secure. This is all about making their mobile OS provide a good experience and look polished.
Manufacturers (and network providers) want to lock you in to their services. To do this they bundle their own customised UIs, their own "special" apps, and their own app stores into the ROMs they push out on the devices they sell. They also don't put too much priority on providing software patches - it's better for them if they can get you to buy a new phone rather than keep your old one going.
The clash between these two sets of competing priorities has led to the memes of "Android is insecure" and "Android is fragmented", both of which are damaging to the google brand. So is it any wonder that google keeps coming up with schemes (Nexus, Silver and now Pixel) to try and end this cycle?
I remain unconvinced that Google actually want to make hardware manufacture a key part of their business. They're just doing what they feel they have to in order to try and unify Android and put it on a par with IOS in people's minds. This is what Pixel is really all about. Same price as the iPhone, same level of build quality, same spec (they don't need to beat any better specced Android flagships here, just stay level with Apple). And the concierge button is trying to out-apple apple; make it so that the thing "just works" even better than the fruitphone does. The only difference with IOS is that there isn't a lower-priced "nearly as good" option (no, the 5c didn't really count, nor does buying last year's model).
The pixel may be too expensive for my taste but I'm not the target audience for this - I'll keep using my regularly-updated and basically stock Android OnePlus and google will be quite happy with that. This is aimed at the people who just want to get a flagship android that "just works". Sure, it's an expensive phone, but it's really not all that much more than the flagships from Samsung, HTC etc. which would be the usual alternatives. The type of consumers that go for flagship androids tend to buy the phone and airtime as a bundle, so any price difference will also be spread over the monthly payments - it's going to be negligible. So yes, it's collateral damage for these other manufacturers, but really it's just normal business - they have to do better than what they're currently offering if they want to continue making higher margins than the budget manufacturers.
The only aspect of the Pixel which surprised me is the exclusive Android features bit... v7.1 vs 7.0 for everyone else. That really does go against the grain of making the Android experience the same everywhere, and stands apart from the two previous attempts (Nexus and Silver). It'll be worth keeping track of whether this a temporary move to aid the marketing of their new device or a permanent feature of Android releases in future - first class Android from Google and standard class from everyone else.
For me, the real question over whether the pixel will make a big difference in the marketplace is whether the networks take it up. I think this time they might; I've noticed a shift in handset pricing on contracts so that network subsidies of new phones are basically non-existent now, and SIM-only contracts are more and more common. They're starting to concede to just being the airtime provider, with any over-the top service being made available as an opt-in, not as something that's intrinsically bundled with the hardware. With that mindset they may well be happy to take a punt on offering the pixel themselves - getting the retail cut of the handset price is better than the zero (on hardware) that they get from yet another SIM-only contract sale.