Some  of both.  The Germans had built and tested two new military organizational concepts that no other army had recognized, the tactical air wing and the armored division.  Their hardware was decent, but not all that much better.  What the German army had done was to put a few officers in charge of creating the organization necessary for this hardware to be put to use on the battlefield in an effective manner.  In both cases, this was largely due to the political backing of Hitler himself, over and against the more conservative high command. Goering was an early Nazi supporter and close to Hitler from before he took power.  Goering had encouraged Hitler to make use of air travel during his election campaigns, something never done in Germany before, and after Hitler began rearmament Goering was given funds and clout to build the Luftwaffe.  The creator of the Armored Division, Heinz Guederin,  benefited from similar direct patronage from Hitler.

The Luftwaffe was effective, but its strength was as much in the terror it caused in the high command of the Allied powers, and in its use in support of paratroop attacks on key points.  It helped, but on the few big battles in Belgium prior to Allied encirclement, it was hardly decisive.  In those battles, the main German army was stopped cold.

The armored division was something that took everyone by surprise.  The Allied powers were utterly ignorant of it, and the German command didn't think it would work as Guederin said it would.  The key was it speed of movement behind the lines.  Guederin crossed into France at a point where the Allies had believed terrain would prevent armored advance, and thus had defended lightly.  Breaking the scattered defenders, the armored division was able to move very quickly in a Sickle Cut to completely cut off the main Allied army in Belgium.  Neither side believed it was possible for an effective fighting force to move as quickly as Guderins panzers moved, and before any reaction was possible the Allied army in Belgium was surrounded.  Cut off and unable to break out, they were forced to Dunkirk.

The Blitzkrieg legend was developed after the fact to explain this sudden victory.  It was not a matter of fighting, though, so much as operational surprise.  British and French tanks were better, and gave the Germans fits.  Their troops fought hard.  Had the Allied planners thought such an attack was at all conceivable, it would have been impossible.

Further, had the Allies pushed into Germany during the occupation of Poland, the war may well have ended right there, or been fought in large part on the banks of the Rhine.

Likewise, had Stalin not kept himself willfully blind to the imminent, and increasingly obvious German attack, the German advance to the gates of Moscow would never have happened.