Do you think it makes sense to grow PM competence within the organization or hire people from the broader market to succeed faster?

This is a tough question to answer because it is so situational. For example - I have seen organizations where PM is so immature that it is essentially a project management function. Melissa Perri even uses such an example in her excellent book Escaping the Build Trap! While in Perri's fictional organization, she was able to develop the PMPs into PMs in the end, many companies would opt to try and hire a few true PMs first.

Another dimension is mix of seniority which is critical on any team (just like in engineering). If you have a team of all very junior-to-intermediate PMs, you may find that you cannot develop any PMs fast enough into being sufficiently senior & that you need to hire outside. A great Staff+ PM is worth their weight in gold because not only do they generate great results themselves, but they act as an accelerant to the rest of the organization: engineers and designers become both more productive and happier.

You also asked about switching folks from other roles in a company into PM (e.g. engineering, sales engineering, customer success, professional services, support, etc.). In my experience, this can work, but moreso at junior to intermediate levels on the PM career ladder. This is because there are a lot of skills that a PM needs to employ that are sometimes not exercised in these other roles. Many such transferees need to be disabused of the notion that PM is just about having a huge wealth of domain knowledge and employing that to "tell people what to do". Even if you can overcome such a barrier and the candidate truly wants to do PM, the compensation gap from where they are coming (particularly if coming from a revenue-oriented role) and perceived demotion may be unsurmountable & you may need to hire from outside.

Regardless of how you grow your product team, you'll need to establish a healthy culture around the product process, how you work, and the principles you run the team with. This means you have a defined process for how you work, it's clear what you expect from PMs in the team and what it takes to be promoted. In my experience, I've found the best results come by clearly articulating your product philosophy and principles and developing high-potential PMs internally while augmenting and accelerating the team with external hires that match the principles you've created.

Here are a few things to consider:

1. Growing PM competence within the organization:

• Pros: Developing talent from within the organization can be a cost-effective way to build a strong product management team. It can also foster a sense of loyalty and commitment to the company among team members.
• Cons: It may take longer to develop product management skills internally, as employees may need time to gain experience and learn from others in the organization, you must take the time to define the processes and culture you want to foster. 

2. Hiring from the broader market:

• Pros: Hiring from the broader market can allow you to bring in experienced product managers who can immediately hit the ground running and contribute to the team. It can also help to bring in new perspectives and ideas from outside the organization or seed new ways of working that you'd like your organization to adopt.
• Cons: Hiring from the broader market can be more expensive, as you may need to pay a premium for experienced talent. It can also take time for new hires to become familiar with the company's culture and processes.