Then what it is do you do differently?
As as follow up how do you find my approach narrow? What does it not consider?
There's nothing wrong with the approach, it is simply only one of a fairly wide range of 'process of play' possibilities. A mild example of a variation on that would be something like Dungeon World, where your Step 1 doesn't happen, the game is 'zero myth' (or at least low myth, arguably). According to the rules of DW the first thing that happens is the table convenes, creates characters. During that process the GM asks questions, the players give answers, and construct backstory/bonds/alignment/etc. of their PCs. The GM then describes an opening scene which relates in some way to these dramatic concerns which the players have voiced.
So the loop 2-5 proceeds from there, but note that the GM has no 'notes' to draw from, they describes scenes, and when the players describe what they do in response, the GM can make 'soft' moves, things that are generally not 'irreversible', unless a player ignores some opening and leaves the GM a path to make a 'hard' move, one that hurts! If a player describes an action that matches a character move (sort of like a power or class feature in D&D) then the rule for that happens, dice are usually rolled, and some mix of what the player said and what the GM gets to say (especially on a bad roll) happens.
Once a scene is played out, the GM will describe a new scene that follows from it, usually with some new obstacle in the way of one of the characters getting what they are after.
GMs can also invent 'fronts' (but only after the first session) which are 'canned' dangers they can put forth as their soft moves. So the GM could invent an 'orc tribe' that will 'invade', and give warning of that as a "doom", a move that portends trouble ahead.
So, in some sense its not THAT different from 'trad' play, but the PURPOSE of the GM's actions is rather different. Another key difference is the GM is not allowed to simply declare actions that the players describe as simply failing because something like "my map says there are no orcs in those hills." Well, if the player rolls well enough, then there may well be orcs there!