The Austrian said in a preview for Sunday's Australian season-opener in Melbourne that Mercedes, the dominant team of the past three years, faced a big challenge.
"We have been very successful over the last three years through stable rules -- but no team has ever maintained its success over such a big regulation change before," said Wolff.
"In a way, it's just what the doctor ordered. To have such a challenge is good for the team.
"We have done the best job we possibly could over the winter and, if we are not the fastest in Melbourne, then it's about finding out why and what needs to be done to get us back to that top spot."
Ferrari emerged from pre-season testing with the quickest times, although the Mercedes pairing of triple champion Lewis Hamilton and Valtteri Bottas did the most laps with impressive reliability.
Bottas, previously with Williams, has replaced 2016 world champion Nico Rosberg, who retired days after winning his first title.
Hamilton, winner of 53 grands prix over his career to date, starts the season as favourite for a fourth championship and to win the opening race.
Bookmakers William Hill have the Briton at 10/11 for Melbourne, with Ferrari's Sebastian Vettel second favourite at 7/2 and Bottas at 6/1.
"We believe that it is going to be another Mercedes procession but the Australian Grand Prix is often unpredictable," said William Hill spokesman Rupert Adams.
Wolff said testing in Barcelona had indicated "that the margins at the front of the field have shrunk," although there was no way of knowing for sure.
Teams use testing to experiment with fuel loads and power unit settings.
Mercedes have won 51 of 59 grands prix since the 1.6 litre V6 turbo hybrid units were introduced. The team also started all but one of last season's races on pole position.
Ferrari and Red Bull are the only teams to have beaten Mercedes since 2013.
(Reporting by Alan Baldwin; Editing by Robin Pomeroy)
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