Warfare is a bit too complicated for single solutions only. A mixture of several combinations is propably more likely to succeed.
The most principle difference should be in the human factor, namely the political leadership, ruling over the military in Germany's case. By removing this limmit, the military, especially the Navy, would be far more effective.
So political choices, such as the sending of U-Boote to the Mediteranean Sea and the Arctic to fight for secondary objectives (Italy and the War against the USSR), rather than breaking the British (and therefore the Americans too, by denying them acces to Europe and the future West Front).
With the available equipment of the period's OTL, perhaps helped a bit by new additions following a slightly altered construction policy, the Germans could very well have caused serious problems for teh British, to remain in the War. Only If the Cordon around the UK was effectively closing the lines of supply to the UK, the UK would be starved to death, being denied crucial goods and fuels.
To achieve this, the pressence of a small, but potentially powerfull surfacefleet was essential, or the British would simply put akll their resources on ASW, rather than being forced to split the few available resources between the ASW and tradtional surfacefleets. So the 4 German battleships were essential, although even with two, the result would be the same, more or less (if these were the biggest ones naturally and if not risked out at sea, but retained as a Fleet in Being). The Cruisers and other smaller warships were less important for this role, although a few should be enlisted as well, to make a potentially ballanced powerfull surfaceaction group. Perhaps juning the old Predreadnoughts was an option, as was the partial deletion of the six light cruisers and cancelation of the new Hipper Class heavy Cruiser. The Destroyer Program should not have been focused on the large Zerstörer, but the smaller Type 39 destroyer, which was both less expensive and more capable, being more multipurpose. Retain the Heavy cruisers of the Deutschland class for mainly political purposes, and as part of teh Fleet in Being.
Most important for a mainly coastal Navy, the Kriegsmarine was to be, would be the large numbers of small forces and non combatants for patroll and minewarfare/sweeping/ASW/AA. Germany needed coastal shiping from especially Scandinavian ports to Germany for resources. These had to be protected.
After War started, cancel all large and complex ships being built, except the ones already more or less completed. Focus on building very large numbers of especially the easy to construct Type VII and Type IX, but also speed up research in newer models, such as the Type XXI and so on. Also speed up the building of trainigncapacity fir the Submarine Division of the Fleet. Also increase production on easy to construct small surface units, especially minesweepers and ASW escorts.
Finally a political issue was to be made: The creation of a Naval Airservice, simmilar to the FAA, or simmilar services, as the Navy, especially the U-Boote, needed an airforce of their own, to simplify communicationlinks and to deploy on its own, rather than waiting untill Göring was in the mood to send some planes.