I was trying to set default python version to python3 in Ubuntu 16.04. By default it is python2 (2.7). I followed below steps :
python3
Ubuntu 16.04
python2
You didn't include the priority argument
sudo update-alternatives --install /usr/bin/python python /usr/bin/python3 5
You can replace 5 with any priority you want. A higher priority alternative takes precedence over lower priority.