Seven Kingdoms II is, at it's core, a real time strategy game. Yes, there are mines and factories to convert minerals into goods, but they function more like a real economy. Morale and troop training also play a huge role in combat. Your King and Generals have the ability to train troops. Without a general or King troops are only trained to a very basic level of combat when created and will most likely be massacred should you send them into battle.
Units gain combat and leadership experience while in training or in battle.
The King is a mainstay throughout your campaign and his experience carries over from one mission to the next. One strategy that I found invaluable was to make sure my King was involved in early battles in the campaign. Maxing out his leadership and combat abilities allowed me to have him train competent generals and soldiers in later missions very quickly. The Fryhtans use a similar system, excepting that their King is called the 'All High' and their generals 'ordos'. Research into production methods, spying methodology, military warfare, weapons and special units is all transferred from one mission to the next.