Avram Grant said his team paid the price for letting their visitors dictate the pace of the game as Birmingham City were 1-0 winners at the Boleyn Ground on Sunday.
The manager, who admitted he would not be celebrating his 56th birthday after the loss, said his team struggled to play the vibrant attacking football that had seen off Nottingham Forest and Blackpool in the previous two games.
His plans were hampered when James Tomkins suffered a calf injury in the warm-up before his replacement Matthew Upson limped off at half-time having tried for ten minutes to continue because of an achilles tendonitis problem.
That said, his rearguard performed manfully with young duo Winston Reid and substitute Manu da Costa, back himself after three months out with an ankle injury, his latest centre-back partnership. The Hammers were undone by Nikola Zigic's headed goal on 66 minutes, with an incisive Sebastian Larsson free-kick eluding everyone but the towering Serb at the back post.
"I think the tempo of the game disappointed me most," said Grant. "We're used to playing with a higher tempo and a high confidence and we didn't influence the game as we know we can.
"It's the first game we've lost to a team near us. Most of the games [against our rivals] we've taken points from so today it was very important. We could have won the game in the first half but we didn't. Then we didn't deal well with the set-pieces."
The manager admitted that Zigic and Birmingham have been something of a nemesis for the Hammers this campaign, earning a home point from being two goals down before triumphing in the Carling Cup semi-final.
"They have done very well against us. They've used Zigic and the tall players very well and unfortunately we lost.
"Of course they scored from two corners in the semi-final and they scored here. I'm not happy about this. We need to deal with this. Larsson is good and the delivery is very good but we need to deal better with this."
Grant added that there was a need to avoid giving away free-kicks in the first place, with Mark Noble conceding the foul on David Bentley when there appeared to be little danger. "We gave them free-kicks when we know these are their strengths because they couldn't create chances from open play."
The manager will be cheered to have Da Costa back while Thomas Hitzlsperger is in contention for a reserve game this week and Demba Ba was a lively late replacement for his Hammers debut. However, Grant admitted there was also some concern over Robbie Keane's fitness with a tight muscle after a second gruelling game in five days.
"We need to think about the next game. We need to look at the positive things that have happened in the last few weeks and look forward because it will be a battle until the end.
"The situation is not easy. Also it is not easy to lose players in the warm-up and after 35 minutes like Upson. But we need to deal with this and take points. We have the quality to do it.
"If you look at what we've done this season you'll know that after every disappointment we've recovered very well. This is part of the thing we are working on and I hope it will prove to be the case again.
"We need to learn from this between now and the end of the season because we deserve to stay but we need to do it. We cannot lose games like this."
With an awayday at West Bromwich Albion next Saturday, the manager knows the story could change quickly - before a resurgent Liverpool arrive in three weeks.
"You cannot say that time is running out as we've got 12 games until the end of the season and there are not so many points between all the teams that are in the relegation zone. So we have time to do it but we want to do it as quickly as we can."