What might make sense is that the Germans build fewer battleships, but focus on making them extremely rugged and very long range so as to allow them to protect their scattered colonies against superior opposition.
Indeed, to have the German Naval Command realize that it is simply impossible for them to match the Royal Navy's numbers (much less the RN, the French, the Russians, and potentially the Americans) in anything resembling a decent length of time.
They therefore assume that ultimately they will lose a naval war of attrition; furthermore, they assume that Britain will probably be able to establish and maintain at least a partial blockade if the Germans wait for a major fleet action.
Thus, the German strategy changes to finding ways to counter this.
Method 1 is by having ships that can outrun and outrange the British, and outfight anything they can't outrun; think the battlecruiser concept but designed as a fast battleship a la Bismarck or New Jersey. Use these ships to pick off any isolated British vessels on the blockade line, forcing them to concentrate and thus potentially opening lanes for blockade runners to get through. If possible, they would include some way of launching aircraft for scouting purposes as a standard feature (pre-radar, an airplane with a radio is probably the longest-range method of detecting an enemy fleet under radio silence). Possibly an early seaplane carrier?
Method 2 is simply swarming the large, expensive, relatively slow British capital ships with large numbers of small, cheap and expendable boats. For this, figure a German version of the PT boat, with ships up to about the size of a destroyer included in this. The idea is to run in, launch torpedoes, and then run back out. I think the maneuver would be described as a caracolle, with ships that have run dry on torpedoes turning to leave and rearm even as fresh ships move in. Destroyers and light cruisers would be used as flagships and to provide some gun support against British escort vessels.
Method 3 is by going under the British blockade. Since IIRC submarine detection early in the war was pathetic to nonexistant, a group of submarines has a decent chance of being able to evade the British blockade and get astride the commerce lanes. At that point, USW comes into play. The only modification might be an announcement that liners will not be sunk without warning so long as 1) they aren't being used as troopships and 2) aren't carrying any war material. If any liner is stopped and found to be in violation of this, the restriction against sinking liners without warning vanishes. Since the British will almost certainly still pull the OTL dirty tricks in that regard, the Germans make the British look bad and remove one of the reasons for the US to enter the war.
If possible, you'd go for a combination of all three of these methods; the extended range fast battleships to pick off isolated warships and force the British to concentrate enough vessels to sink them at any vital location, the PT squadrons to tear apart such concentrations, especially in the North Sea and Channel, and the U-boats to simply avoid the blockade altogether on their way to institute a retaliatory blockade on Britain.
The major issues with this idea that I see are threefold. First, of course, it requires some major changes in German strategic thinking, starting around 1905-06 if you want enough time to design and test the first generation of ships for this strategy and then start working on second generation ships before the war. Second, it requires that the Germans actually be able to build and man the ships, and I have no idea if they could do either even if they have enough time to start expanding the shipyards and naval recruitment. Third, it probably requires that oil be the German fuel of choice for their new Navy, and they'll have to get the oil from somewhere. This will make the Ottoman Empire and Romania more important to their military strategy; it also means that they probably start looking for oil in their colonies, or alternatively looking for potential colonies that have oil.