Yeah, it's definitely a cultural shift from the way most software is built today, but it's a better way to do it in most cases. I was also assuming a startup environment in my comment; established companies can generally afford to do more work up front to make the foundation more robust, and they are (slightly) more likely to have a better idea of what their customers want ahead of time.

But to answer your question more directly, it does happen, it's just uncommon. Where I've seen it done successfully, the rewrites have been piecemeal, not all at once, so that definitely helps with the buy-in factor.