I see this a lot and found the following workaround (after ensuring the developer mode settings):
First install the Phone build. That is Build & Run the Phone target to your phone that is paired with Watch
Then, switch targets and Build & Run the Watch target.
This seems to make the app ready to run in the eyes of Xcode. It just seems like the message displayed by Xcode is a red herring and the real issue is not communicated properly.
Topic:
Developer Tools & Services
SubTopic:
Xcode
Tags: