The Catalan giants dropped to the Europa League after missing out on qualifying for the last-16 of this season's Champions League. Xavi expressed disappointment at his side's fortunes, but admitted the club "must start from zero" as they look to rebuild amid their most difficult campaign in recent years.
"Bayern dominated us," he said. "We always want to dominate but it was the opposite here. We must demand more. We're Barca. This must be a point of inflection to change the dynamic and many more things.
"This is the Champions League, but this is also our reality. It's the situation we're in. I'm angry. This is the reality and it pisses me off. We have to tackle it face on. There's nothing else for it.
"A new era starts today. We start from zero. Our objective is the Champions League, not the Europa League but that is our reality now and we have to try and win it."
The last time Barca were ousted this early from the Champions League was in 2000-01, when the Europa League was still known as the UEFA Cup.
"I've seen how tough the reality is," Xavi added. "I hoped we would compete better. Bayern are better. That's the reality. But we're going to work hard and give our all so that this doesn't happen again. It's a feeling of helplessness.
"We have to start to get Barca back where they belong, which is not in the Europa League. This is also a hammer blow for me as a coach. We will work hard to bring Barca back, but we have to change a lot, of course."
Barcelona are currently placed seventh on the LaLiga table, with two wins, a draw, and one loss since Xavi took over at the club last month.