Italy underwent an economic boom after the Second World War to the point where its GDP overtook the UK and lagged just slightly behind France's in 1990 and we often think of it as a rich European power, but this wasn't the case before WW2. Let's compare Italy and the other main powers of WW2 in 1938:

Per Capita GNP - Italy: 551, Germany: 1,126, Britain: 1,181, France: 936

Per capita levels of industrialization - Italy: 44, Germany: 128, Britain: 157, France: 73

Total industrial potential - Italy: 46, Germany: 214, Britain: 181, France: 74

So economically at least Italy simply isn't an equal to the other main European powers at least at the beginning of the war, and while Italy invested relatively heavily into its armed forces during the interwar period it never fully harnessed its already lacking economy for war. The amount of GDP going to the military peaked in 1941 at 23%, compared to Germany's 52% and Britain's 53% in 1941 (these weren't even those country's peaks).

Italy had also fought a costly (economically) war in Abyssinia which was expensive to administrate after the war, and it was pouring large amounts of resources into Spain during the Spanish Civil War.

The economy also meant that Italy had a much smaller middle class which means fewer officers, and a much smaller number of technicians, engineers, scientists, etc. who could drive innovations and military engineering. Italian equipment was poor compared to other major powers.

Italy also lacked many major resources such as coal, fuel, energy, and metals. Germany's lack of oil is well known but the Italian navy largely had to cease operations due to a lack of fuel and struggled to even sail to Malta to surrender to the British.

Italy was not particularly prepared for war, with Mussolini telling Hitler his armed forces would be ready in 1943. The Italian army was undergoing a massive enlargening process when Italy entered the war and many infantrymen were almost untrained or had received very little training. The army was also unmechanized and had far fewer motor vehicles than the other powers before the war. This is exacerbated when you're growing and expanding the army.

But if Italy spent a lot on its military why was the army unprepared? Well, most focus was placed on Italy's navy and air force. Mussolini's main target was Britain which makes sense when you consider Italy's geography: Britain controls the entrance and exit to the Mediterranian and can cut Italy's shipping routes to the outside world. An Italian-British war would probably be mostly about naval and air superiority over the Mediterranian and certain strategic points like Gibraltar, Malta, and the Suez with some fighting in Africa between smaller colonial armies.

The Italian navy was larger than the French or British Mediterranian fleets and did pretty well, defeating the Royal Navy on a few occasions and securing Italy's supplies to Libya, it suffered heavy casualties at taranto when a British carrier bombed the docked Italian fleet and at Cape Matapan after which the Italian surface fleet did not try to challenge the Royal Navy in a pitched battle again. But while the Italian Navy was defeated this isn't particularly embarrassing a defeat.

Italy's largest failure in North Africa was probably Operation Compass where an unmechanized and largely untrained force was given the order to invade Egypt and pushed into doing so by Mussolini despite the protests of its general. A smaller British force counterattacked and managed to rapidly outpace the Italians, capturing many troops who were just unable to outrun British vehicles on foot. After this Libya was reinforced with well trained and equipped troops who performed well and were repeatedly praised by Rommel. As I've covered before Rommel disliked the Italian officers he worked with and often blamed inferior racial characteristics for this, whilst he took supplies intended for Italian forces for his own men. We often credit the Italian fighting ability to Rommel's leadership but we have multiple cases of Italian officers covering for Rommel or offering him correct advice, so it seems more likely that this increase in fighting ability was down to the fact these divisions were as previously mentioned well trained and equipped compared to the forces previously in Libya.

Italy also failed in the invasion of Greece but once again this was pushed by Mussolini and actually invading Greece would always be difficult due to Greece being mostly mountainous and due to Greece having a large army. While the Italian invasion was unsuccessful the Greek army did suffer heavy casualties and before the German invasion was severely lacking in supplies and reserves. Not to get too "what if" but the Greek army was facing severe problems just continuing the war with Italy and its entirely possible that the Italian army would have eventually conquered Greece on its own.

So Italy's two major defeats or embarrassments seem pretty reasonable and not due to any particular incompetence in the army. Italy simply wasn't a country which could be reasonably expected to fight in the same capacity as a Germany, UK, or USA. Italian officers, in general, were actually pretty competent although Italy should be blamed for lacking much progress in mechanization or in the development of aircraft carriers. But I think when you look at the tools the Italian army have with a largely untrained, poorly equipped and unmechanized army fighting these conflicts then the majority of the blame shouldn't go to the Italian officers, it should go to Mussolini or senior Fascists for pushing Italy into war before it was prepared.

Sources:

Of Myths and Men: Rommel and the Italians in North Africa, 1940-1942 - JJ Sadkovich

Hitler's Italian Allies - MacGregor Knox

The Italian Army in the Second World War: A Historiographical Analysis - Simon Gonsalves