The Department of Defense is undergoing a defining time of transition. After 13 years of war fought by an all-volunteer force, we’re facing a reshaping of our enterprise by a fiscal environment plagued by constant budget uncertainty and a large, continuing decline in resources, and by a historic realignment of interests and influences around the world.

We are at the beginning, not at the end, of this realignment. And as Henry Kissinger recently put it in his new book, World Order, “only a subtle balance of restraint, force, and legitimacy will help forge a new order” – an order that will be years, and probably decades, in the making. This means that the missions and focus of the Defense Department will continue to be marked and defined by transition.

As these dynamics unfold, the U.S. military is engaging in today’s crises and security challenges around the world – degrading ISIL, helping stop the spread of Ebola, and reinforcing our NATO allies. Few would have predicted these missions a year ago, and as you all know well, uncertainty is the only certainty in an interconnected world of seven billion people.

DoD’s responsibilities are to be prepared to address a broad range of contingencies and unpredictable crises well into the future. That means we must prepare our defense enterprise for the challenges of that uncertain future. We face the rise of new technologies, national powers, and non-state actors; sophisticated, deadly and often asymmetric emerging threats, ranging from cyberattacks to transnational criminal networks; as well as persistent, volatile threats we have faced for years.

Our long-term security will depend on whether we can address today’s crises while also planning and preparing for tomorrow’s threats. This requires making disciplined choices and meeting all our nation’s challenges with long-term vision.

That is what the Defense Department is doing today. We are not waiting for change to come. We’re not waiting for that change to come to us. We’re taking the initiative, getting ahead of that change – that change we know is coming – and making the long-term investments we need for the future.

Today our military has nearly 400,000 personnel stationed or forward-deployed in nearly 100 countries around the world, from Afghanistan to the Philippines to Guatemala. This continued forward presence has helped anchor America’s global leadership for decades, with its unmatched technological and operation edge.

That superiority has never been guaranteed, and today it is being increasingly challenged. Technologies and weapons that were once the exclusive province of advanced nations have become available to a broad range of militaries and non-state actors, from dangerously provocative North Korea to terrorist organizations like Al Qaeda and Hezbollah – all clear threats to the United States and its allies.

And while we spent over a decade focused on grinding stability operations, countries like Russia and China have been heavily investing in military modernization programs to blunt our military’s technological edge, fielding advanced aircraft, submarines, and both longer range and more accurate missiles. They’re also developing new anti-ship and air-to-air missiles, counter-space, cyber, electronic warfare, undersea, and air attack capabilities.

America must continue to ensure its ability to project power rapidly across oceans and continents by surging aircraft, ships troops and supplies. If this capability is eroded or lost, we will see a world far more dangerous and unstable, far more threatening to America and our citizens here at home than we have seen since World War II.

Without our superiority, the strength and credibility of our alliances will suffer. Our commitment to enforcing long-established international law, rules of the road, and principles could be doubted by both our friends and our adversaries. Questions about our ability to win future wars could undermine our ability to deter them. And our Armed Forces could one day go into battle confronting a range of advanced technologies that limit our freedom of maneuver. This would allow a potential conflict to exact crippling costs and put at risk too many American lives.

America does not believe in sending our troops into a fair fight. Bob Gates, Leon Panetta, all of our predecessors believe that – and were responsible for ensuring that didn’t happen.

But that is a credo we will not be able to honor if we do not take the initiative and address these mounting challenges now. DoD must continue to modernize our nation’s capabilities and sustain its operational and technological edge. And we must do so by making new, long-term investments in innovation.

We’ve accomplished this before. In the 1950s, President Eisenhower successfully offset the Soviet Union’s conventional superiority through his New Look build-up of America’s nuclear deterrent. In the 1970s, Secretary of Defense Harold Brown, working closely with Undersecretary – and future Defense Secretary – Bill Perry, shepherded their own offset strategy, establishing the Long-Range Research and Development Planning Program that helped develop and field revolutionary new systems, such as extended-range precision-guided munitions, stealth aircraft, and new intelligence, surveillance, and reconnaissance platforms.

All these systems drew upon technological developments, such as the micro-processing revolution, that had unfolded over the course of a few decades. The critical innovation was to apply and combine these new systems and technologies with new strategic operational concepts, in ways that enable the American military to avoid matching an adversary “tank-for-tank or soldier-for-soldier.” Because subsequent leaders, including President Reagan, sustained these investments on a bipartisan basis – bipartisan basis, bipartisan basis – these investments helped America build and hold our military edge for decades.

That’s why I have announced a new Defense Innovation Initiative – an initiative that we expect to develop into a game-changing third ‘offset’ strategy.

This new initiative is an ambitious department-wide effort to identify and invest in innovative ways to sustain and advance America’s military dominance for the 21st century. It will put new resources behind innovation, but also account for today’s fiscal realities – by focusing on investments that will sharpen our military edge even as we contend with fewer resources. Continued fiscal pressure will likely limit our military’s ability to respond to long-term challenges by increasing the size of our force or simply outspending potential adversaries on current systems, so to overcome challenges to our military superiority, we must change the way we innovate, operate, and do business.

The new Innovation Initiative will draw on the lessons of previous offset strategies and ensure that America’s power-projection capabilities continue to sustain our competitive advantage over the coming decades. To achieve this, we are pursuing several lines of effort.

Our technology effort will establish a new Long-Range Research and Development Planning Program that will help identify, develop, and field breakthroughs in the most cutting-edge technologies and systems – especially from the fields of robotics, autonomous systems, miniaturization, big data, and advanced manufacturing, including 3D printing. This program will look toward the next decade and beyond.

In the near-term, it will invite some of the brightest minds from inside and outside government to start with a clean sheet of paper, and assess what technologies and systems DoD ought to develop over the next three to five years and beyond.

The Defense Innovation Initiative will explore and develop new operational concepts, including new approaches to warfighting, and how we balance DoD’s investments between platforms and payloads. It will focus on new approaches on war-gaming and professional military education. And it will focus on our most important asset – our people – by pursuing both time-honored leadership development practices, as well as emerging opportunities to re-imagine how we develop managers and leaders.

I’ve asked Deputy Secretary of Defense Bob Work to guide the development of this initiative, and he will lead a new Advanced Capability and Deterrent Panel to drive it forward. This panel will integrate DoD’s senior leadership across the entire enterprise: its policies and intelligence communities; the armed services; the Joint Chiefs of Staff; and research, development, and acquisition authorities.

I expect the panel to propose important changes to the way DoD diagnoses and plans for challenges to our military’s competitive edge, and I also expected to break with many of our usual ways of doing business, encouraging fresh thinking that is focused on threats and challenges to our military superiority, not simply adapting what is on the books today.

The panel must also face a new challenge head-on: the fact that many, if not most, of the technologies we seek to take advantage of today are no longer in the domain of DoD development pipelines, or traditional defense contractors. We all know that DoD no longer has exclusive access to the most cutting-edge technology, or the ability to spur – or control – the development of new technologies the way we once did. So we will actively seek proposals from the private sector, including from firms and academic institutions outside DoD’s traditional orbit.

The Defense Innovation Initiative will shape our programs, plans, and budgets. As the initiative matures over time, I expect its impact on DoD’s budget to scale up in tandem.

Last week we celebrated the 25th anniversary of the fall of the Berlin Wall. America and its allies prevailed over determined Soviet adversary by coming together as a nation, for the good of the nation. Over decades and across party lines, we worked together to make long-term, strategic investments, including in innovation and reform of our nation’s military – investments that ultimately helped us face down the Soviet military and force the Soviet regime to fold its hand.

We made tough choices then. And we must make tough choices now. We must navigate through this period of transition and realignment, and we must face up to the realities and challenges that our defense enterprise confronts today. So we will be ready for the challenges of the future. If there was one legacy of Ronald Reagan, it is that legacy.

If we make the right investments in our partnerships around the world, in innovation, and in our defense enterprise, we will continue to keep our nation’s military and our nation’s global leadership on a strong and sustainable path for the 21st century.

As President Reagan once said, our nation is at a “time for choosing”: for Congress, our political parties, and ultimately, the American people… for all of us. We must choose wisely.