We've had d-pads for over 30 years. But the Steam controller thinks its too cool for them.

The Steam controller is an attempt to make a controller that functions well in games that were designed for the mouse - those trackpads in it can switch, by software, into a mode that imitates absolute mouse movement or a move that imitates relative joystick/ d-pad movement.

Whether it does it well or not remains to be seen, but they weren't being different for the sake of being different. They were being different because mice on couches don't work, and every PC game is mouse-based, with only some having joystick support. They are trying to solve an actual obstacle that the SteamBox faces. No other console requires you to lean forward on your couch and use a TV tray with a mouse and keyboard to play games.

I think for me it all comes down to deployment in certain games. Their demo video highlighted for me that it just didn't work as a replacement for a mouse and keyboard in games that are fairly strictly built for them.

The demo video where they showed CS:GO made it pretty clear that it wasn't good enough to play a PC shooter against anything other than other gamepad users - the demo showed only a 'tutorial' level with no live enemies, and it was pretty clear that the player was pre-empting the appearance of the targets, and still not hitting them anywhere near as quickly or accurately as a capable mouse user.

Civ 5 highlighted different weaknesses; scrolling around the map was very clearly a very repetitive, thumb-intensive operation and I would not want to do this at all. The user could also seemingly have enough accuracy to select a correct unit when they are overlapping (this can be awkward with a mouse, so with a trackpad, it must be a nightmare). Most importantly though, Civ 5 uses a lot of keyboard commands, and if you want to play at any real pace, the slow thumbing around the world map combined with a complete lack of keyboard commands just makes the game tedious and unwieldy :/

I think for me it all comes down to deployment in certain games. Their demo video highlighted for me that it just didn't work as a replacement for a mouse and keyboard in games that are fairly strictly built for them.

Yeah, the demonstration video while showing that the controller functions, also shows that it might not be the perfect replacement for a mouse and keyboard Valve is claiming, and that it'd take quite awhile to get used to it.

If they really want to show that it can function as a perfect replacement, get some professional/competitive gamers, get them used to the controller first, and then have them battle in games like StarCraft 2, League of Legends, CounterStrike: Global Offensive - half using the controller, half not.