I think part of their problem was that Pochettino just came to the end of his circle, at that point you either change large parts of your squad or you change coaches. They decided for the latter, which is fair enough, but for whatever reason went with the madness of appointing Mourinho. They don't have a squad to compete with Liverpool or City, but a different coach might have them firmly in the top 6, perhaps challenging for top 4.
The other part is their transfer strategy. They had a lot of players who were quite valuable at various points, but instead of cashing in on that value/hype in a one step backwards, two steps forward kind of way they decided to keep their squad together to reach short term goals, now they are paying the bill for that with an aging squad and players like Eriksen or Rose leaving for a fraction of what they could have fetched earlier and even Alli and Kane losing their a lot of their hype.
To be fair the past couple of years have been quite successful by their standards, a CL final in particular is a really big deal for almost any club, so it's not so clear whether that has been worth it.
The bigger problem perhaps is that most of their signings have gone from (very) cost efficient to inefficient. In 15/16 they spent €70m and brought in Trippier, Alderweireld and Son, compare that to what €150m (or €180m if we factor in Lo Celso's buy option) seem to have done for their squad this summer.