He didn't create the state. Before him, Yugoslavia was a serbian-led kingdom and tensions between the ethnicities were high. During WW2, nationalists were preoccupied with killing people of other religion than fighting against nazis, with whom some happily collaborated (especially in Croatia). However, he failed to address the problems, but i m not sure democracy would have resolved them too. Perhaps war could have been avoided indeed.
He did it in that sense, that he changed the complexity, the power distribution and the way it was governed. Also, there were many changes on the societal level.
I also do not think that you can just contribute it to ethnic tensions during WW2 - because they were there, but they were not everywhere. The resistance story is basically that the cetniks were the prime opponents and the ustasa the prime collaborators of the Nazis. Later on, Tito gained support from the British and Russian side (but the support from UK was probably more effective) which raised the profile of the partisans, that were not much of a threat at the beginning of the war.
In my opinion an earlier introduction of democracy would have definitely helped, because the sudden "outbreak" of democracy meant the people were not prepared for that, were pretty gullible and basically voted for dubious leaders who promised them the honey and rich flowing milk of the heavens. And many fell for it.
One other catalycism to that was the economic decline during the 70ies and 80ies. People were forced to use food or fuel stamps (not regularly, but on more than one ocassion). There was a crazy inflation at the end of the 80ies, so people were crying for change and were fed-up with the decline.
The economic problems were partly created by a very bureaucratic approach when it comes to industrialization. Plants and factories were planned on a drawing board. I guess there were shoe and textile factories in every state - too many, most of them too small. There were too many plants for - as an example - TVs, which meant that all of them were too small to compete effectively. When an economic problem was identified in an area they put a plant or a factory there (for whatever), while not looking at the logistics side of it (are there enough suppliers neraby; is there a viable supply chaing) and also not really looking at any benefits vs. risks assessment.
Of course, corruption and incompetence was a problem, but Tito was a problem himself, because he simply was not interested to look at these side of things. Also I guess, there was a concept to fight the ethnic tensions, but I doubt whether the concept was every evaluated and redesigned. So, Tito was too static in his thinking to run a country effectively - which probably applies to every potential leader out there and which is probably one of the main benefits of having new governments from time to time.
