Cook's position as England skipper is under scrutiny after nine winless Tests and 26 innings without a century, and he has received criticism from pundits.
"What he needs to do is do it his way," Waugh told BBC Test Match Special.
"He has to trust his gut instinct, his feel for what is going on and not be afraid to make mistakes."
Cook has been more innovative this summer after being labelled "boring" by player-turned-pundit Shane Warne during England's 5-0 Ashes whitewash by Australia, but Waugh believes the new approach has been counter-productive.
Waugh was particularly critical of Cook's strategy in the first innings of the second Test against India at Lord's, when Liam Plunkett was asked to bombard the tourists with bouncers on a pitch offering prodigious movement.
The tactic backfired as India recovered from 145-7 to post 295 all out.
"The mistakes Cook made on Thursday were, I think, because he was captaining for the commentators," said Waugh, who won 41 of his 57 Tests as Australia captain between 1999 and 2004.
"They have given him a lot of criticism about how he has been boring and hasn't got the game moving along.
"But 145-7 on a flat track, that is when you needed to be boring, bowl line and length and wait for the nick.
Waugh won 41 of his 57 Tests as Australia captain between 1999 and 2004"They could have bowled India out for 180 and been 150 runs in front. Instead they went for the 'Bodyline' theory, leg side, just to be innovative and seen to be doing something. Unfortunately he picked the wrong time to be innovative."
Cook and Warne this week ironed out their differences during an hour-long telephone call, after the England skipper had called for a crackdown on "personal" attacks on his style of leadership.
Waugh, who also captained Australia to victory in the 1999 World Cup, said Cook should not take any notice of media opinion.
"Warne has said what he said - that's fair enough he's a commentator, but if I was Alastair Cook I'd be doing my job and staying well clear of what people have got to say.
"You just have to cocoon yourself away from all that because that's part of the game."
England have not won a Test since their 3-0 Ashes victory over Australia last summer, since when they have suffered a 5-0 whitewash in the reverse series down under and a 1-0 home defeat by Sri Lanka.
Waugh expressed sympathy for Cook over how England had unravelled in Australia due to circumstances beyond the captain's control.
"It was just a catastrophe for England in Australia, with Jonathan Trott going home and Graeme Swann retiring halfway through.
"There were other issues, with Kevin Pietersen - it obviously wasn't a happy camp - and Matt Prior losing form, but Cook was left to his own devices to try to work it out."
You can listen to the full interview with Steve Waugh on Test Match Special during Saturday's tea interval.
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