So they were good at it before, and only became bad in the one year since Watson signed his contract? That seems a little unlikely.
Well, Cal McNair took over as owner in November of 2018 when his father passed away. Here is the timeline of significant transactions since then:
Nov 2018: Cal becomes owner
April 2019 Easterby hired as executive VP of team development
June 2019: GM Brian Gaine Fired. No new GM hired, O'Brien and Easterby will fill the role
Aug 2019: Clowney traded for pennies on the dollar
Aug 2019: Texans trade for Tunsil, Stills, Giving up 2 1sts and a 2nd round pick
Sep 2019: Nick Martin signed to a ridiculous extension
Dec 2019: Mercilus signed to a ridiculous extension
Jan 2020: Texans finish season 10-6, Beat Buffalo, lose to KC in divisional round 51-31
Jan 2020: Easterby promoted to Executive VP of football operations
March 2020 : DeAndre Hopkins traded for second round pick, David Johnson
Sept 5th 2020: Watson signs extension
Oct 2020: After 0-4 start, O'Brien fired
Nov 2020: Award winning VP of communications Amy Palcic fired
Jan 2021: Texans finish 4-12
Feb 2021: Nick Casserio Hired, David Culley (who?) Hired, Watt released, Jamie Roots Team President resigns
So yes, the incompetence did start before Deshaun signed his extension, the evidence of the incompetence didn't really manifest itself until the 2020 season and has only gotten worse in the 2021 offseason.