Some elements of your question have been considered in earlier answers here. While you're waiting for fresh contributions, you might like to review some or all of them; collectively they pose some interesting questions about the thesis of Austro-Hungarian decline:

I've been reading about World War 1, it seems as if the Austro-Hungarian army exhibited a truly unbelievable degree of incompetence. Was it really that bad? Would the outcome of the war have likely been substantially different if they were simply moderately competent?, with u/k_hopz

Was Austria-Hungary in decline pre-WW1?, also with u/k_hopz

Was Austria-Hungary considered a powerful country on the eve of WW1, was it seen as comparable to France, Great Britain of Russia?, with, you guessed it, u/k_hopz

Here's a different question: did Austria Hungary perform poorly in WW1?

/u/mikedash has linked some of my previous answers here, but I'll include a brief answer addressing some of the more specifically military reasons for Austria-Hungary's defeats. You can chalk them up to three main reasons, in my opinion:

1. Strategy: Austria-Hungary's strategic vision for World War I was deeply flawed from a purely rational perspective. In 1914 they conducted offensive operations against both Russia and Serbia. A more calculated plan taking into account A-H's military abilities might've limited their operations in Serbia to a holding action while sending the bulk of their forces to Russia to hold back "the Russian steamroller." This plan would've been more helpful in the overall Central Powers' plan of defeating France first, then turning to Russia. But the German-Austrian joint military planning was marked by severe miscommunication and deception. Instead, Austria devoted two (and a half) armies to the offensive in Serbia which weakened the ability of their eastern forces to hold back the Russians. In essence, Austria split their forces so that neither the armies in the east or in the south had enough men to win strategic victories. Rather than purely rationalistic reasoning, Austrian planners were operating within a nexus of dynastic, political, and national considerations that caused them to take the decisions they did. They were obsessed with crushing Serbia, which posed a threat as a model to the Serbs and other nationalities within Austria-Hungary. They were heavily influenced by the contemporary "cult of the offensive" which held that soldiers were most effective when used in offensive operations. The result was huge loss of life and increasing German control of Austrian forces. 1914 permanently crippled Austria-Hungary's war-waging capabilities as nearly the entire prewar army of 1.5 million was wiped out in the first year of war.

2. Generalship: Following the first factor, Austria's generals were simply not on par with their opponents. Some were brilliant, including General Svetozar Borojevic, who won plenty of success leading defensive operations against the Italians in the west. Others were not nearly so successful. Field Marshal Oskar Potiorek, who commanded the Balkan troops, was thrice outmaneuvered by Serbian Field Marshal Radomir Putnik. The result was the complete destruction of Austria's Sixth Army in December 1914 and the hair's breadth escape of its Fifth Army.

3. Experience: Austria-Hungary had not fought a major war since 1866, the lost Austro-Prussian War. Since then, most of its opponents had had significant military operations against conventional forces. Russia had had to fight (and lose) the Russo-Japanese War of 1904-5 while Serbia had fought (and won) the First and Second Balkan Wars of 1912 and 1913. Especially in the latter case, these conflicts taught some very important lessons about the way modern weapons systems would be used on the battlefield. By contrast, Austria entered World War I without a combat-experienced officer corps, generalship, or even NCO corps. Its soldiers simply had never been in battle. As a result, Austria was a bit behind in terms of infantry-artillery cooperation and the use of machine guns. Where Russia and Serbia had learned a little bit about these issues during their recent wars, Austria had to learn these lessons during the First World War. Their infantry-artillery cooperation did improve, but only after the disastrous offensive operations of 1914. The Austrians created some remarkably effective stormtroop units, but only after watching thousands of infantrymen die in 1914's frontal assaults.

The sum, for Austria, was a disastrous 1914/1915 that it never recovered from.

Related question: did language barriers exist between ethnically diverse (I assume) Austro-Hungarian troops and if yes, did they turn out to be a handicap?