It just failed, for several major companies. Nikon also had the "Nikon 1" series, with J1 to J5, very small cameras, very nice, and very capable lenses like the 10-30mm VR PD-Zoom, which although is a relatively "slow lens", has remarkably good quality. A quite small and light combination. But the problem? It's not "pocketable". The "just barely" pocketable (I personally don't consider 4 CM depth pocketable, 3 CM is) Sony RX100 series with a fixed lens is obviously very successful. Some other fixed lens cameras are also relatively successful, surprisingly even Fuji's X100 series with a prime lens, definitely not "pocketable" cameras but still quite small and lightweight and "premium feeling" and fun to use, and of course the Ricoh GR series, cameras which ARE "pretty pocketable" (3.3 CM depth for example), so people really like that.
You're just not going to get cameras with such depth if it's an ILC system, and most people don't WANT to switch between lenses. Many people buy a "kit" and stay with that one "kit lens". Some good deals can be found for Olympus, Panasonic, Canon, Sony, and other ILC camera + lens kits, so people get that cheap deal but don't become "system enthusiasts", they just consider what they got "a camera", not "a kit" or a part of "a system". Then there are "enthusiasts" like most of us, some "professionals", and the few people who want a very small and lightweight ILC system. But you're just not going to get a "pocketable" camera. Even GM5 + 20mm is thicker than 6 CM. What's the point? It's not "weather sealed" either. Even Nikon 1 failed, and I'm telling you, J5 + some very nice zoom and prime lenses is very fun. Only a few lenses in the system, but they did a great job, and it still failed.
What I think is that nowadays we want reliability on top of everything, and we're not getting it. I want some proper dust and water resistance. Some. It's mainly smartphones that offer that. Almost all small camera offerings have none of that, some very very low quality cameras like TG-7 do (purple fringing from hell, flare extravaganza, soft image), the fine ones are "premium" priced and almost always not cameras you can carry in your pocket. Pocketable ILC is not going to happen. Fixed lens cameras, yeah maybe there's still hope, but I don't see it becoming common any time soon.