Carlo Ancelotti believes Everton must 'follow' the example of Jurgen Klopp at Liverpool.
Klopp was appointed Liverpool manager in 2015 and last week guided them to a maiden Premier League title with Ancelotti hoping he will soon be able to challenge with Everton.
The Italian admitted he is looking to improve his squad 'year-on-year' after signing a four-and-a-half year contract in December but remained coy on transfer links to Lille defender Gabriel Magalhaes.
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"Everton has to be competitive and fight for the first position of the Premier League with Liverpool, with Chelsea, with Tottenham, with Manchester United, with all the big teams," Ancelotti told Sky Sports.
"I don't know how long it takes but I hope that soon we are able to compete.
"We have a young squad with young players with a lot of skills, a lot of ability. I think just the fact that we can improve this skill and this ability can give us more opportunity to stay at the top."
Ancelotti added: "I think that Liverpool did a fantastic job in the last five years. When Jurgen came, and year-by-year they improved their squad.
"I think this is the way that we have to follow - to improve the squad year-by-year."
Everton had made progress in their pursuit of Lille star Gabriel before the suspension of matches in March but the shifting financial landscape means that future negotiations will be much different for a player who was valued at £30m.
When asked if he was confident of securing a deal for the 22-year-old, Ancelotti replied: "You have to ask him!
"Honestly, we are looking around - this is absolutely normal as all the teams do at the moment - but the squad, the manager, the staff are focused on finishing the season."
