James Vaughan netted the only goal of the game for Town 10 minutes after the interval and Dyche admits the Clarets now face a tough task to make the play-offs after extending their winless run to six matches.
"I'm disappointed more than frustrated. It's a very poor performance, simple as that. Unacceptable," said Dyche.
"I didn't think the effort was lacking but we talk about working hard - we also talk about working smart - and we didn't work smart tonight.
"There were too many players who looked confused with their performance. We came away from the basic principles of what we've been doing."
When quizzed about the possibility of finishing in the top six, Dyche added: "It's out of our hands now, it's in other people's hands.
"The only thing we can assure is we need to improve on that, we need to go hard because there's enough games to make it. But it's a big challenge now because those are the games you have to be winning."