1. Determine the base requirements.
2. Build the first draft.
3. Determine what parts of the first draft are useful. Capture those in a design guide.
4. Iterate on the parts that were useful but not fully fleshed out.
5. Add refinements to the design guide.
6. Define adjusted and new requirements. Pull in elements from the design guide as applicable, design and build new elements when they don’t exist.
7. Repeat.
(Note: I’m sure I truncated some steps you can fit in the flow)
Design systems are living documentation and a lagged record of solutions that work in context. They are incomplete and will always be missing things but with each subsequent iteration they should continue to evolve and adapt.
The design system moves at a slower velocity than the product development which informs it. This is why the phase layer model works well for me to help describe this iterative process.
This compliments your desire for minimal design upfront and rapid development with engagement and validation with the people who are putting it to use.
Addendum: Added note about layer velocities.
Addendum 2: Fixed a few typos