A combination of factors most likely. But who of us really knows?
You can have success with every possible formation, just like you can fail with every possible formation.
But I do think that we never had the right players to play 4-3-1-2.
And even if you do have the right players, you'd need to make sure that the guy who plays as the trequartista is really special. And frankly, Diego is good, but he's nowhere near great.
Personally, I have always believed that when you just had a successful season (which we had, 2 in a row even), you shouldn't make drastic changes. You should focus on making small upgrades where necessary. We did the complete opposite & it backfired.
What players do you require for the 4-3-1-2?
Camo played in such a system in the past, so has Poulsen, so has Diego, and we had a glut of CM's like Tiago and Marchisio. Our wingers such as Marchionni and DC were mediocre. Giovinco wasn't given a chance. Nedved has always been better in the middle like he was with Lippi, and I think he was held back in his role under Capello. With Ranieri, Pavel was just getting too old.
To be honest, we didn't really have the players for either system. We had too many garbage players and with an inexperienced manager, trouble was bound to occur.
If you recall, there were several complaints against how we couldn't create shit under Ranieri. People tend to forget that. And without Del Piero, I think it's fair to say we would have created far less than we did. So IMO, this 4-4-2 stuff is an illusion.