Nintendo fans are very well aware of Monolith Soft nowadays, as they've created multiple Xenoblade titles for Nintendo platforms. Monolith Soft has also worked alongside Nintendo on their major franchises like The Legend of Zelda. It's crazy to see how far the company has come, especially when you realize how they started.
According to a Famitsu feature with Monolith Soft’s Hirohide Sugiura, right after Square-Enix published Xenogears, the dev team wanted to make a sequel. Square-Enix was instead moving into production on Final Fantasy: The Spirits Within, a Final Fantasy movie. That meant Xenogears 2 couldn't happen unless there were some major changes.
Sugiura decided to move on, and he founded Monolith Soft with Tetsuya Takahashi and Yasuyuki Honne in 1999. The team couldn't create Xenogears 2 as they originally wanted to, but they worked on the spiritual successor Xenosaga: Ep. 1 instead. This lead Monolith Soft down a whole new path, which would eventually see them snatched up by Nintendo.
I'd say the decision to move on from Square-Enix to follow their own path certainly lead them to bigger and better things!