Speaking after the loss at a sold-out Signal Iduna Park, where 81,365 fans packed the stands, Kovac pointed to clear progress in the title race.
"I'm disappointed about the result but pleased with the effort," he said. "We need to take the progress into account. Last year, we were 25 points behind Bayern. This year, it's 11. Bayern can buy top players for 70 million or 80 million euros.
"We sign players with development potential with whom we're largely satisfied. We're not doing so badly at all."
The match itself was dramatic. Nico Schlotterbeck gave Dortmund the lead on 26 minutes, heading home from a Daniel Svensson corner to make it 1-0 at the break.
But Bayern responded strongly after half-time. Harry Kane levelled on 54 minutes, tapping in after Serge Gnabry headed the ball across goal. Kane then made it 2-1 in the 70th minute, converting a penalty after Josip Stanisic was fouled. The brace took him to 30 Bundesliga goals for the season.
Dortmund hit back in the 83rd minute when Daniel Svensson volleyed in from a Marcel Sabitzer cross to restore parity at 2-2. Yet Bayern had the final say. Joshua Kimmich struck a left-footed volley in the 87th minute to seal a 3-2 win.
The result left Bayern 11 points clear of second-placed Dortmund with 10 matches remaining in the Bundesliga season.
It had been a difficult week for Dortmund, who were also eliminated from the Champions League by Atalanta. However, Kovac's message was clear: the gap to Bayern was closing, even if the latest Klassiker ended in frustration.