If you read the previous article on Micro Stories, then grasping the concept of Episodic Reduction should be very simple. It also helps to remember the Five Stage Plot, though not necessarily required.
What is Episodic Reduction? It is the reduction of the overall plot into self-contained episodes. Each episode becomes essentially a micro story, exhibiting the various sections of story development common to an entire story. In other words, each episode has exposition, rising action, climax, falling action, and denouement, per the Five Act Structure. But, the resolution of each episode should lead directly into the next episode. Episodes should build on each other and often reflect the Five Stage Plot that I mentioned above. Yet at the same time, each episode builds upon the overarching plot.
Let’s outline this a bit to better explain, using the Five Stage Plot as a template.