The Defence Secretary has warned that the UK's enemies have "studied our vulnerabilities and adapted far more quickly than us".
Ben Wallace was speaking at a briefing to discuss the Integrated Review, which British military chiefs will use to reshape the Armed Forces, with decisions made according to threats facing the country.
It has been described as the deepest review of British foreign, defence and security policy "since the Cold War" by the Prime Minister.
"The global picture has changed," said Mr Wallace, speaking on board HMS Tamar, the Royal Navy’s newest and greenest ship on the River Thames in London.
"Our enemies have studied our vulnerabilities and adapted far more quickly than us.
"The static concept of war versus peace no longer applies as we are contested on either side of the threshold of armed conflict on a regular basis."
Downing Street has previously said the Integrated Review will go beyond the parameters of a traditional strategic defence and security review (SDSR) by looking at the "totality of opportunities and challenges" the UK faces.
It is designed to examine defence, foreign and security policy, threats of the next decade, relationships with allies and changing strategy on the international stage.
The Defence Secretary added the Integrated Review will "represent a step-change – not just in how we adapt to the threat, but in how Whitehall faces up to the difficult decisions that must be made".
"In the past, too many reviews were over-ambitious or underfunded or both," he continued.
"Too often the budget, not the threat, did the talking. So we will pivot away from what we have become used to and instead reshape our Armed Forces to become a force fit for tomorrow’s battles, not fighting yesterday's."
Those battles could include cyber and space, as well as harnessing new technology.
The Chief of the Defence Staff said interoperability between the services and allies must be a focus going forward.
"The future of war is going to be very much about a competition between hiding and finding," General Sir Nick Carter said.
"It means that at the heart of the way we design our Armed Forces, will be a digital backbone that enables our effectors and our sensors and our deciders to be properly integrated together to achieve an effective that’s much greater than the sum of the parts.
"It recognises that our opponents have upgraded their capabilities as well and that’s a competition we also need to win if we’re going to be capable of deterring them," the UK military chief added.
"There will need to be a very sophisticated programme of experimentation that helps us move toward this modernised force into the 2030s."
Ben Wallace said he expects a military "prepared for persistent global engagement and constant campaigning, transiting between operating and fighting" to emerge from the Integrated Review.
"Instead of mass and mobilisation, this future force will be about speed, readiness and resilience, operating much more in the newest domains of space, cyber and sub-sea, and working to prevent conflict, as well as winning it," he added.
"Our future force will continue to project our global military power and influence in concert with other our allies.
"Ours will be an Armed Forces that operates at full capacity with a more flexible force structure that is better equipped for lighter tasks.
"It will be a future force that, not only maintains our leadership in NATO, but is more forward deployed: deterring Russian activity in Europe; combatting terror in the Middle East and the Sahel; and countering Chinese activity in the Asia Pacific."