First check that you have updated your iPhone to the latest compatible software version:
Then follow the remaining steps to update your Apple Watch to the latest compatible software version:
If you are unable to install the update, then it may help to follow the steps in the second article under the headings "If you need help updating" and/or "If you installed an iOS or watchOS beta or developer seed" as appropriate.
However: do not interrupt your iPhone or Apple Watch if the process has already reached "installing". Note that you may need to scroll up on your iPhone screen to see the current status.
If the issue persists, then it may help to unpair and re-pair your Apple Watch. The software will be updated as part of the process. Again be sure to update your iPhone to the latest compatible version of iOS first: