The background assumption is that there are rules of diphthongization where tense vowels /ō ē ī ū ǣ / become [uw, iy, ay, aw, ey], the latter being written various ways in contemporary transcriptional practice, esp. using "j" for "y" in the IPA. When a vowel is laxed, you get [ɔ ɛ ɪ ʊ æ] though for lax /u/ the derivation and outcome is more complicated, so you get [ʌ] in many cases. Word-pairs like profound, profundity; serene, serenity; divine, divinity illustrate the basic tense/lax quality alternation.
The next question is, when do you turn tense vowels into lax vowels; and do you also turn lax vowels into tense vowels? The divine/divinity pattern results from a laxing rule, Trisyllabic Laxing, which has to do with how many syllables (2) follow the underlyingly tense vowel. So /divīn/ → [dʌvain] by dipthongization, and /divīn-iti/ → diviniti by Trisyllabic laxing.
The tensing rule, often called "Abelian-lengthening" takes a stem-final lax vowel and makes it tense, if followed by iV̆, so /ǣbel-ian/ → æbēlian → [əbi:liən]. What makes this confusing is that there is also laxing before certain suffixes where the target is not in the third syllable, for example -ic (cone, conic). You can't tell from harmonic whether the diphthong in harmonious is because of Abelian-lengthening or is because the root is /harmɔ̄n/, but harmony with a lax vowel tells you that this is an underlying lax vowel, therefore the tense vowel is from Abelian-lengthening.
The "closed syllable shortening" theory isn't what SPE does. As for a non-SPE account, you can consult the wiktionary list of -ic suffixed words and intuit pronunciations. The majority of words are marginal, in the sense that thee are not words that most people know. I've never uttered "apophenic" or "apophonic" in my life as a paid phonologist, but I would pronounce the former with [i:] and the latter with [ɔ], so I thing the ic-shortening rule is probably more specific, affecting root <o> and the suffix -ite, that is, it is about how we read.
A caveat to the user: you have to consult the final rules in the summary, p. 238 ff, which will refer you to where in the previous text they present that version. The rules change form in the course of the book, when they uncover new facts or add new theoretical devices.