My Apple Watch series 3 only has 2.4 gb this update says it takes 2.7 gb

Unpair your Apple Watch via the Watch app on your iPhone.

Then Re-pair your Apple Watch,this frees up a surprisingly large amount of storage space.And without any loss of data.

Or this;

If you don’t have enough space to update your Apple Watch – Apple Support

You would need to delete any data that you can to do it. Or...the unpopular option may be to upgrade so your watch has more storage space. Otherwise you’re stuck unfortunately