Lydon and Wales Under 20 head coach Richard Webster refused to make excuses for the defeat but insisted the team will now be determined to regain their confidence when they play Italy on Saturday and in their remaining games.
"It's a huge disappointment to lose with that kind of score line", said Lydon, "and it was especially disappointing that we didn't manage to even get on to the scoreboard.
"We have to look at the key factors in what caused that result, including the system that allowed that to happen.
"At the end of the day, a barometer of how we judge our international age grade set-up is how many international players we produce, and as we've shown in recent years, we have a good record in that regard, with the likes of Sam Warburton, Josh Turnbull, Leigh Halfpenny, Dan Biggar, Jonathan Davies, Ryan Bevington and Scott Andrews all coming through the Wales Under 20 side in the last three years.
"More important however, is the intensity of rugby our players become used to and the week to week playing environment within which they hone the core skills and develop technical and tactical game understanding
"Whereas a large number of the New Zealand side play regular Super 15 rugby, we can't say the same about our Welsh international age grade players. While quite a few have had LV=Cup experience, they are not playing regularly for their regions in high level, intense and important games.
"We have to look at why that is - although some of our squad players figured strongly for their Premiership clubs in key British & Irish Cup, SWALEC Cup and Principality Premiership matches, an area already under review, others have hardly played any rugby since the Six Nations and that's something else we need to look at.
"We have to work more closely with the regions and the Premiership clubs in order to produce players who are ready to compete at a high level, even if that means working to further reduce the number of non-Welsh qualified players within Wales.
"The players are coached in the same way as New Zealand, they are taught the same techniques, but New Zealand's execution was much more clinical, and again, that comes down to the intensity in which they play rugby week in, week out."
Head coach Richard Webster was honest in his assessment of the game but insists the team now has to put it behind them in order to prepare to play Italy in their final Pool game on Saturday. He said: "Things went badly wrong for us because we had no ball or field position and we came up against a very strong team that took us apart.
"They capitalised on every small mistake - whereas against other teams you might recover, there was no chance of that with New Zealand.
"Whatever we did to try to turn things around, they found a way of countering that, if we kept it tight, they went wide, if we went wide, they went up the middle. New Zealand are a class above the rest - they beat Australia 62-17 in last year's final which just shows where they are in this age group.
"We will have to look at the reasons for the heavy defeat further when we return home but for now, as a group, we have to put the loss behind us and focus on playing well against Italy on Saturday.
"Wales finished in seventh place in this competition last year, sixth the year before and we have a good chance of improving on those positions which is what we will be aiming to do."