The initial stages of the formation of SiGe islands on Si(001) pose a long-standing puzzle. We show that the behavior can be consistently explained by one simple assumption-that for strained SiGe, (001) is a stable orientation but not a facet orientation. Calculations of energy and morphology reproduce the key features of "prepyramid" and "pyramid" islands, and explain the initial formation and subsequent shape transition. Scanning tunneling microscopy measurements confirm the key assumptions and predictions of the model.