I think we'll have to agree to disagree on this one - involuntarily downgrading someone (even for the short leg of a longer trip) and refusing to compensate them can never be "the right outcome", otherwise where do you draw the line?
It's run by the airlines and is (unsurprisingly) entirely skewed in their favour..... Their procedures for an on-the-day and in-lounge downgrade automatically allocate you into the most expensive, fully-flexible economy fare bucket, and then they say "Ah-ha - the fully-flexible economy ticket that we forced on you when we downgraded you from business is more expensive than the business class ticket you paid for, so we don't owe you anything". That's not right, fair or morally acceptable, and the proportion of the overall journey is irrelevant.....