The Mossad has really suffered over the decades. Its entire reputation (based on lies and fabrications and exaggeration) has been effectively demolished–certainly in the Arab world if not in the Western world.
But even in the West, there were many bungled Mossad operations: the assassination attempt on Khalid Misha`ah which was foiled by one bodyguard, or the famous parading of Mossad agents in Dubai Hotel, or the kidnapping of a man named Hasan Nasrallah because the Mossad experts thought that there was only one Hasan Nasrallah, etc.
The Mossad in my youth had a reputation that it can never fail in its missions, although from the 1980s Admiral Stansfield Turner had it right when he told ABC News that Mossad gets a high score in PR but a much lower score in actual effectiveness.
The recent episode was the press statement by Netanyahu that the Mossad was able in a highly sophisticated operation to snatch the wrist watch of Israeli spy, Elie Cohen.
But within a day the true story was exposed: that the Mossad bought the watch from an auction. Tomorrow, the Mossad will show off a potato and it will claim that it was once owned by Elie Cohen.
Israel faces really acute strategic deficits that it never suffered before: 1) the Israeli soldier is no more scary to Arab fighters.
If anything, it is the other way round. People in South Lebanon still like to tell stories on how Israeli soldiers were audibly screaming out of fear in the July war of 2006. 2) the Mossad does not have the reputation that it had in the past. It is a matter of time, really.