I am unable to install a watchOS 2 WatchKit app due to an application-identifier entitlement. This happened after turning on App Groups in the Capabilities tab.
Full
I had the same error until I restored the watch to factory defaults as per https://forums.developer.apple.com/thread/17948
"Apparently if you have and existing WatchOS 1 app and try to update it to WatchOS 2 the bundle identifier changes and causes this error. If you update your watch you will need to do reset it if you had installed WatchOS1 app before updating that app to WatchOS2."
This happened when I tried installing over top of an adhoc build.
My problem was the App ID in combination with the certificate used to create the provisioning profiles. None of my provisioning profiles were working because none of them were "Elgible" (created with a certificate that matched the App ID). I had moved development to a new machine, so perhaps this was the deeper reason. At any rate I had to create a new certificate, then new provisioning profiles with that certificate being careful to choose the right App ID when creating them. Good luck.
Delete any previous versions of App from your iPhone and then Clean->Build and Run again. Your app should run smoothly on your Device.
Also, please make sure you have not selected Distribution Certificate in your Project Settings while trying to run your project directly on your device.
Steps
Even though I followed some few logical steps: uninstall app, rebuild project, the only solution that worked for me was: restart XCode. (XCode 8.1)