In 'Atomic Habits', James Clear emphasizes that real change is achieved through small, consistent actions rather than lofty goals, advocating for a focus on identity and systems over outcomes. He introduces concepts like habit stacking and the habit loop, illustrating how to build good habits and break bad ones by leveraging cues, making adjustments to environments, and finding immediate rewards. Effective habit formation requires a systems approach, with strategies such as the two-minute rule and habit tracking to support long-term success.