I see more and more people working in a way similar to what you describe, but I haven’t seen anyone describe it as well as you did here, congratulations on that :)
In my teams we have been using a similar approach since a while back. (https://medium.com/the-engineering-team/design-the-missing-lego-piece-in-the-agile-development-kit-58be7a07d91b)
I guess what I would like to understand better from you guys is on the tools side. What do you use to implement this process? When you talk about rapid prototyping and prototyping iteration where do you start? Paper based low fidelity prototyping?