Erling Haaland struck twice, with Tijjani Reijnders also scoring on the day.
“We are happy to win but the way we are with the ball, we have to improve otherwise it will not be enough to be title contenders in March, April and May,” Guardiola said.
“Always I have to thank Erling for the goals but today thanks to him, Phil and Nico O’Reilly, they help us a lot to do this game.
“Defensively we are improving and we can visualise it but with the ball, we are away from what we have to do. We are not close.
“The way we attack depends on how the opponents defend, we have to be in the right spots to make it more fluid and we were not.
“We are happy, we cannot deny we are in the Champions League spots, the semi-final of the Carabao Cup and up there in the Premier League.
“I want to be honest and I said to the players ‘I’m happy and Merry Christmas’ but we have to improve, it will not be enough.”
Guardiola expanded on that warning: “We will be there. If they follow me, we will be there, but we have to improve.
“I know the level but it’s not enough. The spirit, the aggression, the hunger is there. All the attributes they need that is not highlights. Many things, we have to do better. We have to remember that Rodri, Omar, Jeremy, Kova, Rayan Ait-Nouri are not here.
“We had five players from the Academy on the bench today.
“I am happy they follow us but if we want to reach the next step, we can find the spaces and we have to be the right spots that define the team.”