Wales were in the game at half time as they trailed 13-7, and had spurned good scoring opportunities, but fell away in the second period as Scotland fly half Finn Russell (30) took charge of the game and Gatland’s side had no answer.
"We need to make some tough calls moving forward," Gatland told reporters.
"We are in a bit of a hole at the moment. It’s how we get out of that with the development of the younger players and the squad. We need to be honest and critical in the things we know we can fix up. We’ve got to do it very quickly."
He had made six changes to the side that lost 34-10 last weekend at home to Ireland, including dropping stalwarts Alun Wyn Jones (37) and Justin Tipuric (33) in what is seen as a changing of the guard.
"It’s a lose-lose situation. People are never happy," Gatland said when quizzed about his selections. "I thought Dafydd Jenkins (20) was good and Christ Tshiunza (21) made some good carries.
"There’s a review process. We’ve got to be incredibly honest about the changes we need to make. We made a much better start this week.
"Discipline was a focus and being more clinical when you create opportunities. There wasn’t much improvement in those final two areas. We need to fix it up quickly.
"We need to be ruthless. We gave away 19 penalties which isn’t acceptable at this level. We weren’t clinical enough. We quite easily could have gone in at halftime ahead. We went 22-7 down and ended up chasing the game."
Gatland confirmed wing Louis Rees-Zammit (22) would be fit for their next game at home against England on February 25.