Pep Guardiola says Manchester City must find a way to get their confidence back following a second consecutive defeat.
Manchester City were beaten 2-1 by Leicester City on Boxing Day as a late Ricardo Perreira goal sealed all three points for the Foxes.
The loss made it two defeats in two for the reigning Premier League champions, who were shocked by Crystal Palace in their last match before Christmas.
Guardiola says it will be important how City react to their first run of back-to-back defeats in more than two years.
"It was a similar performance to the Crystal Palace game, we started well but conceded a goal the first time they arrived in our box. Mentally we are lacking confidence in that situation," Guardiola told the BBC.
"We have to accept it, we have to realise that we have to work harder and try to get immediately one good result and get our confidence back."
Manchester City's big problem in recent weeks has been the team's defending, having conceded five goals in the two defeats.
Liverpool have conceded just seven goals all season, compared to Manchester CIty's 15, which is still joint second best in the league.
The Citizens have kept eight clean sheets in 19 games, and Guardiola says that is a problem going forward even if it is not the biggest concern.
"Of course we are worried [about not keeping clean sheets]," he said.
"The result is what counts, we lost. In four days we have another one. We are together, we will work harder and we will come back with some good results. The season is very long and we have lots to fight for."
With the loss, Manchester City fell to third in the league behind Liverpool and Tottenham, with the Reds now having a seven-point lead on the defending champions.
Next up for Guardiola and Co. is a match against Southampton on Sunday before an all-important clash with Liverpool on January 3.
"Liverpool and Tottenham deserve it, they win games and we don't, the gap is increased," Guardiola said.
"Last season we had a big gap, this season Liverpool and Tottenham are very good. We have finished the first half of the season, we have enough points to be champions but the other teams make more, they are better than us at the moment.
"Football is fascinating, unpredictable. People say what we did last season was easy, it was very difficult."