Dalglish wrote in the Sunday Mirror: "City's steep learning curve in Europe continued in the Bernabeu, but they shouldn't be too downcast, despite the manner in which they lost.
"Real Madrid are as good a side as they are going to meet in Europe this season and City should be really encouraged with the way they played.
"You have to learn how to play successfully in Europe, but City shouldn't put too much emphasis on the Champions League.
"They must also focus on defending their Premier League title, as it's easy to get distracted by the Champions League.
"Doing well in Europe will be a bonus for them this season, but their first aim should be to make the knockout stage - something they failed to do last season."