Speaking ahead of tomorrow night's blockbuster clash with an undefeated Essendon at Patersons Stadium, Lyon feels his side is still well short of their best football.
"All of us, the whole team, we reckon we've been running at about 70 per cent. So we've got plenty of improvement.
"And that's the aim, to improve, because there's plenty of top-line teams that we're going to be playing and it starts with Essendon on Friday night," Lyon said.
Fremantle has been widely praised for its performances over the opening two rounds but Lyon was keen to keep the focus on the battle ahead.
"We see it as a really strong challenge against a quality team.
"They've set themselves for us. I think James (Hird) spoke about it straight after their last win so we understand what's coming.
"It's going to be a fierce battle ... a real opportunity for us to improve and test ourselves.
"We really want to overcome that challenge and be three and zero but there is plenty of work to do," he said.
The game itself has been overshadowed by the allegations surrounding James Hird and the Essendon football club, but Lyon would not be drawn to comment on that situation.
"I think they've handled it really well. I think we put it on the table - I'm really here about Fremantle and the game.
"I think we all understand that there is a serious issue; there's an investigation, there are reports pending. So from my position I think you leave it to the correct authorities and wait for the outcomes," he said.
Lyon was open about the fact that Essendon have won the last five matches against teams that he has coached dating back to May 2009, when Lyon was in charge of St Kilda.
Fremantle led the Bombers at three-quarter time in round 13 last season only to be held goalless in the final term to lose by 24 points at home.
"I think if you went to every situation you'll find they were quite unique situations.
"I thought I'd put it on the record because clearly there is chatter about it, so that's ok.
"It's just feedback that I need to improve my coaching against the Bombers. That'll be the aim," he said.
Lyon was also amused by discussion that former charge Brendon Goddard had been vocal at Essendon training this week about how to cope against Ross Lyon coached teams.
"He never used to listen in my team meetings. BJ, I hope you started listening," he said.
"They're paying him to play, not coach.
"Look I have regular contact with BJ - he's one of my favourites; a favourite person, a great player, they're fortunate to have him, and he'll be a handful on Friday night."
