After winning last season's league title by a point the Etihad club would have been hoping to be only the third team, and second club, to win three Premier League tiles in a row.
"If we don't beat them, then the chairman [Khaldoon al-Mubarak] will come, or the sporting director [Txiki Begiristain], and say, "It's not good enough, we want the Champions League, I'm going to sack you".
'Then "OK, thank you, it was a pleasure"'.
Guardiola's men still have a chance to win the FA Cup, League Cup - where City will face Aston Villa in the final and the Champions League.
Talking to Football Daily, the City boss said: 'That's why it is so hard to win it. "It has happened many times and could maybe happen".
Following Champions League success last term the European champions have since added UEFA Super Cup and Club World Cup accolades to their growing list of honours, though Lovren wants the Merseyside club to build on their recent triumphs and be remembered as one of the greatest sides in football history.
"We clicked this year, maybe even last year, but we missed out by one point on the Premier League title". I dream and will enjoy preparing games games against madrid, to see what we can do. That is the process. I'm 30, so another good five years. "What is the best coach in the world?"
'We give a bad, bad message for the new generation, to our kids, to just count the victor, the trophies.
"Sometimes individuals think if you are Pep, Jurgen, or you are one more [big] name, you need to win all titles every period with 2000 million factors as well as 2000 million objectives".
"Sometimes it's not possible, sometimes because of the opposition, sometimes you can not do it".
"You say the season is a disaster but, if you win the Champions League, it will be exceptional. Why?"
City face Real in the first leg of their Round of 16 tie at the Bernabeu on February 26 with the return match on March 17.