How to make sense of the formation last night?
My best shot at explaining it is as follows. Pep watched Bayern destroying Barca the previous night and was convinced that we have to use a much more defensive formation should we play Bayern to stand a chance or avoid a humiliation. But we haven't played such a formation for ages. So, let's practice it a bit against Lyon.
Pep knew that a combo of a 35 y.o. midfielder at CB and a CB who is just back from a very bad injury is not likely to fare well against Bayern or Mbappe and Neymar. So, he thought we could win the CL if we played defensively and relied on our forwards to bail us out. Thus, the implicit mesage to the team was: we are not good enough to compete right now and have to be clever. The players' confidence took a big hit already before the start of the game and they looked hesitant and confused.
Pep was realistic about our defensive weaknesses but instead of inspiring the team to give 120% he made them fearful. He was thinking more about our weaknesses and not about our strengths. He is failing in the CL not because his philosophy doesn't suit it but because he betrays his philosophy. Go for it, we have a brilliant attack and can beat any team on our day.