Pep Guardiola has questioned whether Manchester City can compete with the European elite at the moment, and insists they must improve on their current form.
The reigning Premier League champions completed a domestic treble last season, but trail league leaders Liverpool by 14 points after losing 2-1 to neighbours Manchester United on Saturday.
City have lost four times this season - as many as they lost the whole of last campaign - and after one victory in their last four league games, the Spaniard has pondered whether his side can keep pace with the European giants.
"United have the quality to defend and the quality to attack on the counter-attack and you have to accept that," Guardiola said.
"That is the level we face, against Liverpool, United, Barcelona, Madrid, Juventus - they are the teams we have to face and the reality is maybe we are not able now to compete with them.
"We have to improve and accept it and move forward. Maybe we need to live that as a club to improve, to accept the reality now and improve."
City have plenty to play for, however having already qualified for the knockout stages of the Champions League with a game to spare and are on course for a third successive Carabao Cup triumph, meeting League One Oxford United in the quarter-finals later this month.
And the 48-year-old believes his side, who pipped Liverpool to the title by one point last season, remain in the hunt - but must battle through their current predicament.
Guardiola continued: "The reality is we are 14 points behind for the mistakes we have done, for the quality of our opponents and especially, as well, the things we cannot control. That is the reality but we have to continue.
"We are at the beginning of December and we have other competitions to play in and other games to fight and improve on.
"Maybe this is going to help us for the future so we need to live this as a club to be better.
"We are not thinking of winning the Champions League, I am not thinking about how many points we need or how many points they have to drop.
"We are trying to win games, to win the next one."
Guardiola's men travel to Croatia to play Dinamo Zagreb in their final Champions League group game, with top spot already secured before a trip to the Emirates to face struggling Arsenal on Sunday live on Sky Sports Premier League.