The Rate-Limiting Step
- Difficulty
- Moderate
- Time to result
- ~weeks to results
- Steps
- 5
- Confidence
- —
A mental model Lerner took from working in an oil refinery as a lab technician. A refinery is a flow system: dirty oil in, clean oil out, paid per gallon, with costs denominated in hours. Somewhere in that system is a bottleneck, the narrowest point constraining throughput for the whole plant. It might be blocked centrifuges, a filter, a furnace that is not hot enough or nobody to unload the trucks, and it moves around. Open the bottleneck and the entire business speeds up; apply resources anywhere else and the effort is wasted. Applied to a growth model, it means finding the one constrained stage and pointing resources there, which also gives every person in the organisation an unambiguous daily priority.
Origin
Extracted from Deep Dive with Ali Abdaal
How to run it
- 1
Model the business as a flow
Describe the business as a throughput system with stages, in the same way a refinery converts dirty oil into clean oil. Your growth model is that flow diagram.
Pro tip The simpler the flow representation, the easier it is for non-specialists to see where they sit in it.
Watch out Most tech businesses are more complicated than a refinery, so resist the urge to make the diagram exhaustive.
- 2
Measure the rate at each stage
Walk the system and read the flow rates, stage by stage, rather than assuming where the problem is. In the refinery this was literally an hourly walk with a clipboard.
Pro tip Set a regular cadence for the check, because the bottleneck moves as conditions change.
Watch out A stage that feels painful is not necessarily the constrained one. Read the numbers.
- 3
Name the single narrowest point
Identify the one stage constraining throughput for the whole system, and state it plainly enough that anyone in the organisation can repeat it.
Pro tip Ask whether the constraint is capacity, calendar time or creative process, because the fix differs completely.
Watch out If you name two or three bottlenecks you have not finished the analysis.
- 4
Point resources at the constraint and nowhere else
Open up the bottleneck and the entire business goes faster. Resources applied to any other part of the system will be ineffective, however useful the work looks in isolation.
Pro tip Use this as the tie-breaker when filtering growth experiment ideas.
Watch out Protecting the constrained resource often means saying no to genuinely good work elsewhere, which is the hard part.
- 5
Re-check, because the bottleneck moves
Once a constraint is relieved, throughput rises until something else becomes the narrowest point. Repeat the walk and find the new one.
Pro tip Keep the previous bottlenecks on a list so you can spot when one recurs.
Watch out Continuing to pour resources into a constraint you have already opened produces no further gain.
In the wild
Lerner's first real job was as a lab technician in an oil refinery. His actual task was to walk the plant every hour with a clipboard, read flow rates on the machines and tell the shift supervisor where the bottleneck was so he could go and get it opened up. Most people there had not been to college and did not understand operations management, yet everyone knew exactly what they should be doing every day: get as many gallons as possible through their machine or truck. The whole workforce had one shared priority at any given moment.
→ A shared, visible constraint gave hundreds of workers an unambiguous daily priority.
Asked where his rate-limiting step was, Ali identified the amount of time he spends on his YouTube channel, currently one filming day a week in which the team tries to bang out two videos. Everything else in the calendar, meetings, courses, podcast interviews and software work, keeps squeezing the filming days out. He then split the constraint further: it is not just filming time, it is the lack of thinking and ideation time, since working on the channel is treated as filming only. Relieving it would mean either more filming days or acquisition channels that do not depend on him being in front of a camera.
→ The bottleneck was named as the founder's protected creative time, not headcount or budget.
Common mistakes
Spreading resources evenly across the system
Effort applied anywhere other than the constrained stage does not raise throughput. It feels productive and shows up as activity, but the output number does not move.
Assuming the bottleneck instead of measuring it
In the refinery it could be centrifuges, a filter, a furnace or unloading, and it moved around. The only reliable method was walking the system and reading the actual rates.
Defining the constraint too narrowly
Ali initially framed his bottleneck as filming days. On examination the real constraint included idea generation and deep thinking time, which changes what relieving it would look like.
From the transcript
“somewhere in this system there's a bottleneck there's a narrowest point that is constraining the throughput rate of the entire system”
“open it up the entire business grows the entire business goes faster and if you apply resources anywhere else in the business it will be…”
“so wouldn't it be useful to know in your growth model where is your rate limiting step”
From the episode
How to Scale your Startup with Growth Levers: Matt Lerner