At the same time, Hagel said, the plan will lead to Pentagon policy changes that encourage "fresh thinking that is focused on threats and challenges to our military superiority, not simply adapting what is on the books today," Hagel said.
"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," Hagel said in the keynote address at this year's Reagan National Defense Forum.
"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," Hagel said.
Hagel signaled that traditional defense companies may get a smaller share of Pentagon investment dollars.
"We will actively seek proposals from the private sector, including from firms and academic institutions outside DoD's traditional orbit," Hagel said.
Hagel calls the effort a "third offsets strategy" and compared it in scale to two past "offset" initiatives, including the nuclear buildup of the 1950s that ultimately helped end the Cold War, as well as the 1970s-era effort that led to the development of precision-guided missiles, stealth aircraft and advanced intelligence, surveillance and reconnaissance platforms.
"Offset" is a term used by military and defense industry professionals to refer to substantial breakthroughs in strategy or technology that can offset an adversary's advantage in traditional military strength.
Specifically, Hagel said Deputy Secretary of Defense Bob Work will guide the development of this initiative, by forming a new Advanced Capability and Deterrence Panel.
Work and other Pentagon officials have signaled that the Defense Department is looking for new ways to partner with the defense industry and other intuitions to share research and development costs.
Some experts say the new "offset" strategy suggests that the Pentagon is seeing classified information showing evidence that adversaries are making advancements in military technology faster than previously thought.
The new program is not limited to technology research and development. It also calls for a "reinvigorated wargaming effort" to "develop and test alternative ways of achieving our strategic objectives and help us think more clearly about the future security environment," according to a two-page memo Hagel's office released Saturday.
And the new initiative may target some personal policies and practices that affect military careers.
"It will focus on our most important asset — our people — by pursuing both time-honored leadership development practices, as well as emerging opportunities to reimagine how we develop managers and leaders," Hagel said Saturday.
Hagel reiterated his longstanding call for Congress to lift the threat of budget caps known as sequestration, which under current law will severely impact the defense budget in October 2015. He said losing America's military superiority could have catastrophic consequences.
"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, allowing a potential conflict to exact crippling costs and put at risk too many American lives," he said.
"America does not believe in sending our troops into a fair fight. 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," he said.
Andrew Tilghman is the executive editor for Military Times. He is a former Military Times Pentagon reporter and served as a Middle East correspondent for the Stars and Stripes. Before covering the military, he worked as a reporter for the Houston Chronicle in Texas, the Albany Times Union in New York and The Associated Press in Milwaukee.